Any major benefits to a holding LLC?

[Pedro Morais]

BP Team, 

Seems like there is a lot of interest in other posts regarding whether it is necessary/wise to have an holding LLC in addition to individual LLCs that own property. I found a lot of mixed opinions and felt best to start a new post to consolidate strong perspective from people that have actually have researched this topic.

Scenario: let's say someone owns 5 multifamily properties, each one under an individual LLC. Would it be advantageous to bring these 5 LLCs under a holding LLC? Some say that the benefits of this is that it gives you an extra layer of protection, anonymity (if you have the holding LLC in a state like Delaware) and additional ease in transferring money between the LLCs. Others say that by having the holding company you can actually put your individual properties at risk as someone can now find a way to sue the holding LLC and, because it owns the assets in each individual LLC, then all the equity you have built in each property is now at risk. In addition the holding company also represents extra costs (annual filling fees and additional insurance).

Would love to hear people's opinion on the pros and cons of the holding LLC. If you believe a holding company is a wise to do, could you clarify on whether this could be done separately from creating an "operations LLC" (or do you always need both?)

Thank you!!

[Ashish Acharya]

Originally posted by @Pedro Morais:

BP Team, 

Seems like there is a lot of interest in other posts regarding whether it is necessary/wise to have an holding LLC in addition to individual LLCs that own property. I found a lot of mixed opinions and felt best to start a new post to consolidate strong perspective from people that have actually have researched this topic.

Scenario: let's say someone owns 5 multifamily properties, each one under an individual LLC. Would it be advantageous to bring these 5 LLCs under a holding LLC? Some say that the benefits of this is that it gives you an extra layer of protection, anonymity (if you have the holding LLC in a state like Delaware) and additional ease in transferring money between the LLCs. Others say that by having the holding company you can actually put your individual properties at risk as someone can now find a way to sue the holding LLC and, because it owns the assets in each individual LLC, then all the equity you have built in each property is now at risk. In addition the holding company also represents extra costs (annual filling fees and additional insurance).

Would love to hear people's opinion on the pros and cons of the holding LLC. If you believe a holding company is a wise to do, could you clarify on whether this could be done separately from creating an "operations LLC" (or do you always need both?)

Thank you!!

I will let the attorney chime in from the legal perspective. 

From taxation, the holding company is especially helpful when you have partnerships. Rather than having different partnerships for each asset, the holding comp will reduce the tax compliance fees by eliminating the need for tax returns for all the underlying entities that are 100% owned by the holding partnership. 

In some states, you also avoid entity-level tax/fees if you have a holding level LLC (applies to both SMLLC and MMLLC). KY is one of them.