How do I form a holding company?

Question

Hi! I am wondering how to form a holding company. I was told that you just form a standard LLC and I would just list my current LLC as a managing member. Is that correct?

Jason Malabute · Answer

Ben  forming a standard LLC with your current LLC as a managing member is possible, but the bigger question is whether you need a holding company. Consider if it will truly benefit your tax position, liability protection, or asset management, or if it will just add unnecessary paperwork.

If you’re in a state like California, keep in mind that you’ll have to pay $800 annually to the Franchise Tax Board, file a periodic Statement of Information (SOI), and submit a Beneficial Ownership Information (BOI) report.

It’s a good idea to consult a real estate attorney to ensure you’re making the best decision for your specific needs.

Austin Cheatham · Answer

I think you need to ask yourself "why do I need a holding company?" Will this optimize your tax position or legal position? You could be creating unnecessary paperwork, headache, admin responsibilities, etc.

This is more of a legal question, but typically I would think for a holding company you would want to list yourself as the manager of the holding company. And then have all of your other LLC's be members in the holding company (if that is what you're trying to achieve).

Sean O'Keefe · Answer

@Ben Foullon you can do that but the better question(s) to ask is do I need a holding company? What entity structure is best for my specific real estate investment needs?

Chris Seveney · Answer

question should be "why" - why do you need a holding company. Typically a holding company is used for large companies like walmart - who has a shipping/transportation company, a real estate arm, the arm that sells the products etc.  If you are a real estate investor, why do you need a holding company? Unless you are doing construction and acting as a GC, owning a property management and leasing company as well as owning real estate, maybe then have one. But if you do not have property then no need to have a holding company- waste of $.

How do I form a holding company?

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