A subsidiary company is a company that is owned wholly or in part by another company. The company that owns a majority interest in a subsidiary is considered its parent. A limited liability company, or LLC, is an independent legal entity that can contract and own property in its own name. It has the standing to own interests in other businesses. To turn a regular LLC into a parent company, it would have to own a subsidiary.
Form any type of business under the laws of a state. Every state has a business code that provides for the formation and registration of entities, including corporations, LLCs and partnerships. You can choose to form any type of business to serve as your LLCs subsidiary, including another LLC. Prepare the proper formative paperwork, such as articles of incorporation or articles of organization, for filing with the state agency that handles business registrations, usually the secretary of state.
Read More: Can More Than One Business Be Conducted Under One LLC?
List the LLC as the sole owner of the stock or interest in the new business. The formative paperwork of the new business will typically ask you to identify the owners of the business. For an LLC, the articles of organization will likely request the name and address of the members. For a corporation, the articles of incorporation will request the initial number of authorized shares of stock and might request the names and addresses of the initial board of directors. List the LLC as the new corporation's sole board member. Issue all outstanding stock in the name of the LLC to indicate that it has 100 percent ownership.
Purchase all of the outstanding ownership interest in an existing business. The LLC can acquire a subsidiary through a purchase rather than by forming a new company. The LLC can buy all of the existing shares of stock of a corporation, for instance, or purchase the ownership interests of the members of an LLC or the partners in a partnership.
Amend the formative paperwork with the state, if the LLC acquires an existing business. Some states require the current ownership or management of the company to be reflected on the company's articles, or require an annual filing to update the information. Additionally, the name and address of the company's registered agent must be kept current. File an amendment to the company's articles and a form to change the registered agent, if needed.
Terry Masters has been writing for law firms, corporations and nonprofit organizations since 1995, specializing in business topics, personal finance, taxation, nonprofit issues, and general legal and marketing content creation for the Internet. Terry holds a Juris Doctor and a Bachelor of Science in business administration with a minor in finance.