I am becoming a builder/developer and wanted to know if I can start an LLC as a holding company, and then build each project under it's own LLC. The project LLC's would be held by the holding company LLC, in theory. Is this possible?
The hope is that it would provide protection and keep each project's liability separate. HOWEVER, if possible, how does this apply to the builder's license? Can each LLC under the holding company operate under the Holding company's building license?
Yup, it's often referred to as a land bank. The holding company doesn't need a GC license, but since it is all under one umbrella so to speak, it really shouldn't matter.
Thanks for the response Dave. I must have missed this; sorry I didn't reply sooner.
In my case, it would be most advantageous for the holding company to have the GC license and then build each project under a separate LLC but using the main company's license to construct.
Make sure you investigate the franchise taxation implications of using this type of arrangement. If your state treats all of this as one company you may be paying more in taxes by selecting the structure.
In this structure, the LLC that the property is in hires the other LLC to build the house. Make sure to put a contract in place between the 2 entities.
Wow, I never would have thought about a franchise/tax implication. I'll have to look into that.
Thanks Lynn. I'll be sure to put a contract in place between the two. Since the LLC's are both owned by my company, would I have to pay some kind of formal fee to "hire" the the one with the builder's license? I'd rather not move money around if it makes it easier.
That would be a question for a lawyer, but I would guess that the answer would be yes.
The LLC that is GCing the job should be run much like an independent business with it's own checking account, all contracts and invoices with your subs going through that entity, etc.
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