I'm in the process of structuring my LLC's. I have one LLC that is intended to be my "holding LLC" and two other LLC's that will each hold one property and will fall under the holding LLC. My question is around filing. If I intend to have two LLC's under my holding LLC, does the holding LLC have to be the "manager" of each of the LLCs during filing or how do I actually put the LLCs under the holding LLC. Thanks in advance for any guidance you can give me!
Attorney · Member since 2022 · 160 posts · 186 votes
3y
Hi Lexie,
What you are describing is a Hub and spoke structure. There is a Hub LLC that owns other LLCs. These spoke LLCs own properties. You could structure the Management and Membership of the spoke LLCs in different ways. The Member of the spoke LLC is normally the Hub LLC. The Manager can be you, or you could list the Hub LLC for this. This will depend on how you structured the Hub LLC. It is sometimes possible to get more anonymity for your spoke LLCs by using an anonymous Hub LLC as the Manager.
Accountant · McKinney, TX · Member since 2023 · 393 posts · 580 votes
3y
It sounds like you are describing a series LLC. If that's the case, I would just work with an attorney to include the proper verbiage in a company or operating agreement to ensure it is set up properly. This would be state specific as an LLC, so the language needed or set up might be different depending on the state or states you operate in. For banking purposes you also want to ensure you are maintaining the integrity of the transactions and keeping them segregated.
Attorney · Member since 2022 · 160 posts · 186 votes
3y
Hi Lexie,
What you are describing is a Hub and spoke structure. There is a Hub LLC that owns other LLCs. These spoke LLCs own properties. You could structure the Management and Membership of the spoke LLCs in different ways. The Member of the spoke LLC is normally the Hub LLC. The Manager can be you, or you could list the Hub LLC for this. This will depend on how you structured the Hub LLC. It is sometimes possible to get more anonymity for your spoke LLCs by using an anonymous Hub LLC as the Manager.
how do I actually put the LLCs under the holding LLC. Thanks in advance for any guidance you can give me!
You would have to formally approve the formation of the subsidiary or subsidiaries and document such in the corporate minutes of the holding company. Then when incorporating the subsidiaries, specify the subs to be wholly owned by the holding company and list holding company as the owner.
Rental Property Investor · Toledo, OH · Member since 2023 · 39 posts · 14 votes
3y
I am setting up something similar but with more holding companies under. I'm curious how you plan to do the banking portion for each LLC? Will each have their own bank account? Curious how your attorney is advising you on this. I will have about 7 under one management LLC and really don't want that many bank accounts. Some say I should, some say I do not need that many..
What you are describing is a Hub and spoke structure. There is a Hub LLC that owns other LLCs. These spoke LLCs own properties. You could structure the Management and Membership of the spoke LLCs in different ways. The Member of the spoke LLC is normally the Hub LLC. The Manager can be you, or you could list the Hub LLC for this. This will depend on how you structured the Hub LLC. It is sometimes possible to get more anonymity for your spoke LLCs by using an anonymous Hub LLC as the Manager.
Hi Jason,
In this structure, regarding the manager being oneself or the Hub LLC, how does that work if a property management company is being used? How does the banking or finance side of the structure look, does each LLC have its own bank accounts, checks, credit cards, other records and tax returns, or does all of that reside with the Hub LLC? I believe it is possible to structure LLCs for each property in such a way that a form 1120 is not needed and everything moves through the form 1040, is that correct?
Real Estate Consultant · OH · Member since 2023 · 2k+ posts · 1k+ votes
3y
I hope I'm not becoming a broken record, but Anderson Advisors would be very helpful to you! They are helping us structure our LLCs very similar to what you described. They might have a YouTube video that would help too.
New to Real Estate · Northeast, OH · Member since 2022 · 24 posts · 28 votes
3y
Hi @Sarah Kensinger, that’s Clint Coons company! I watch his YouTube channel. Can you ballpark an approximate cost they may charge for a parent or hub llc with a first property llc within or beneath it? Thanks!
Hi @Sarah Kensinger, that’s Clint Coons company! I watch his YouTube channel. Can you ballpark an approximate cost they may charge for a parent or hub llc with a first property llc within or beneath it? Thanks!
Yes, it's his and Toby Mathis company. We are platinum members and since we took part in a virtual all-day workshop, we were able to join at a bit of a discounted rate. We paid about $3,000 for membership but if I understand correctly, the fees for just an LLC without membership would be about the same. Although for non-members there would be an hourly rate around $350, so I'm not totally sure how it would all come out.
Attorney · Member since 2022 · 160 posts · 186 votes
3y
Hi Kevin,
The property management company is usually an entirely separate LLC with a contractual link to the Holding Company. The idea is to maintain a separation between the interaction and the ownership. The rental management company would collect rents and pay all expenses on behalf of the property owner. Usually each spoke LLC would have its own bank account. Despite this, because none of the spoke LLCs should be interacting with any party apart from the rental management company, they may not need to have checks and credit cards. The bank account for the spoke LLC exists primarily to receive any income after the rental management company has paid expenses on the property. If you structure everything in a certain way, as you noted, this structure can be pass-through.