Properly setting up a holding and operating LLC

6 Replies

I've been doing some research online and reading over every relevant thread on this forum regarding having a holding company and operating company system in place for asset protection.

I already have my operating company that's an LLC in which I am the only member.

I would really appreciate it if you guys could clear somethings up for me since there's a lot of conflicting info on this and I want to make sure I can set it up properly:

1) When I create my holding company LLC, should I add multiple members (ie. myself and a family member) for any enhanced asset protection? Or does it not matter?

2) Once my holding company is created, should the holding company become a member of the operating company? Or should there be no obvious connection between the two other than the fact that the holding company will control all assets.

3) Should both companies have insurance or if the operating companies member is the holding company... then insurance for the operating company is enough?

I'm seeing a bunch of people saying that the operating company should be a single member LLC in which the holding company is that member... and then another side which says that it's okay if I'm the sole owner of both LLC's aslong as the holding company owns the assets.

Really confusing and just trying to clear things up since I imagine incorrectly setting this up would do the same as just having the operating company.

Thanks so much for your time!

@Christopher Phillips

My holding company will only loan money to my operating company. All it will hold is basically the cash earned from the operating business

@Christopher Phillips

Depending on the type of real estate every suggestion would differ?

Sorry trying to understand and apply this to my current situation since I'm not investing in real estate yet but would still like to implement the holding company and operating company model.

Thanks for your time Christopher!

@Pedro Salamanca

Yes. the type of investments make a big difference.

Tax treatment for buy and hold is different than if you are doing flips. That's why I asked.

what’s ur opinion on buy and hold investments 

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here