How Do I Create an LLC Subsidiary?

Creating a subsidiary can be a useful way to expand or grow an existing limited liability company.

Ready to start your business? Plans start at $0 + filing fees.

Trustpilot star rating bar
how do i create an llc subsidiary

Contents

Updated on: March 21, 2024
Read time: 3 min

An LLC subsidiary can be an excellent way to organize your business. The subsidiary provides a way for your LLC to expand and grow while still maintaining the same organization as the parent company.

What is a subsidiary?

An LLC is a special entity recognized under state law that is neither a sole proprietorship, a partnership, nor a corporation. A limited liability company allows you to "pass-through" the company’s profits so that the LLC member or members pay taxes.

It also protects your assets if there is a lawsuit, with the company being liable instead of the LLC owner or owners.

When an LLC ventures into a new market or new area, it often makes sense to create a subsidiary LLC, so that it can have a clear focus on one market share or product and promote itself separately from the parent company.

A subsidiary is a company owned by another company, the parent LLC. The parent LLC owns at least 50% of the voting stock of the subsidiary. The subsidiary enjoys all the same benefits that the parent LLC enjoys in terms of pass-through taxation and liability protection.

How to create a subsidiary

Creating a subsidiary is very similar to the process you followed to set up your LLC. To create a subsidiary, you will first need to choose a name for it. You must select a name that is not registered by any other company in your state (and it cannot have the same name as your parent company).

Do a name search on the state secretary of state website to ensure the name you’ve chosen is available.

The name of the subsidiary must include one of the phrases: “limited liability company,” “limited company,” “LLC,” or “LC,” depending on your state requirements.

Complete articles of organization

Get a copy of the articles of organization form from your state secretary of state website and complete it for your subsidiary. The form will ask you to name the subsidiary LLC members, the address for the business, and the person authorized to receive legal documents for the company (called the registered agent).

List your parent company as a member of your subsidiary since they have a stake in the LLC ownership. The parent company might be the only member, or you might have other members, such as individuals or other companies.

When you sign the form, be sure to sign it with your name and role in the parent company, such as “Sally Smith, president of Parent LLC.” Submit your documents to the state with the required fees. Once they are approved, your subsidiary is official.

Finalize the details

Determine if you need to apply for county or city permits or business licenses to operate your subsidiary, or if you can operate under the parent company’s licenses, and if a license is required.

For your own use, you need to write an operating agreement form for the subsidiary that specifies the relationship between the parent company and the subsidiary. 

This agreement lays out the specifics of the company, such as the management structure and member responsibilities. You do not need to file this with the state, but you will want to have it, so there is no question about the company's ownership or responsibility for debts.

A subsidiary can be a useful addition to your LLC and can allow your company to grow and expand.

Ready to start your business? Plans start at $0 + filing fees.Start My LLC
Twitter logoFacebook logoLinkedIn logoReddit logo

This article is for informational purposes. This content is not legal advice, it is the expression of the author and has not been evaluated by LegalZoom for accuracy or changes in the law.

2 days ago
Trustpilot star rating bar

Piece of Cake!

Wow, if I had known HOW EASY it would be to create my own LLC I would have done it months ago! I literally created my own business in MINUTES. LegalZoom takes all of the fear, confusion, guesswork and administrative burden out of starting your own business. Strongly recommend it!

Lori Ann Farrell
6 days ago
Trustpilot star rating bar

Excellent, rapid, economical LLC formation…

Legal Zoom enabled me to very quickly and economically set up my LLC

Sarah Collins
7 days ago
Trustpilot star rating bar

They made creating my llc such an easy…

They made creating my llc such an easy process and gave me plenty of options. I genuinely never even thought of. So happy I had this option.

Cassaundra Eckleberry
10 days ago
Trustpilot star rating bar

Filed my LLC confidently thanks to LegalZoom

Sittie answered all my questions and made me feel much more confident about forming my LLC this morning. Including some basic tax questions that she was able to answer. So greatly appreciate her help.

Cassandra E
21 days ago
Trustpilot star rating bar

LegalZoom was great to start my first LLC

LegalZoom was great to start my LLC! The process was simple and easy! Very fast as long as you know what you want your name to be and what your business is doing. Highly recommend for the people that like to do it themselves online. Great experience

Bruce. M
25 days ago
Trustpilot star rating bar

Out-of-State LLC Business Formation

I was at a standstill with no resolution in sight - LegalZoom fixed me up within minutes & made filling the Out-of-State business form LLC-5 with the State of California, easy! Thank you!

Cheryl Williams
54 days ago
Trustpilot star rating bar

Legalzoom help me set up my LLC efficiently. The instructions were simple, and I had a positive experience overall.

Legalzoom made starting my LLC fast, easy, and stress-free.

CoreSpan Technologies
32 days ago
Trustpilot star rating bar

legal Zoom Concierge

legal Zoom Concierge agent, Jelly, called me and walked me through the process of selecting how I wanted to set up my LLC with through explanations. I recommend using the Legal Zoom concierge for customers not yet familiar with the process of creating and LLC.

CC
101 days ago
Trustpilot star rating bar

Was very easy to use and I got my LLC…

Was very easy to use and I got my LLC the same day. I was SHOCKED. I know every state is different but it was like a miracle. Thank you LZoom!

Erica Walters
102 days ago
Trustpilot star rating bar

My experience has been excellent from…

My experience has been excellent from the first day opening my LLC, and continues to be great now that my business is thriving. All of my important documents are organized and secured on their sight. Which is amazing when getting loans and doing my taxes. They also provide great customer service every time I call with questions. Would highly recommend using LegalZoom. Plan to start another business and will be using them again. Thank you LegalZoom!

George Wells
108 days ago
Trustpilot star rating bar

Five Stars For LegalZoom

LegalZoom offers a streamlined and accessible platform for creating an LLC, simplifying complex legal procedures for entrepreneurs. Their user-friendly interface and comprehensive guidance ensure that even individuals without legal expertise can confidently establish their businesses. Overall, LegalZoom enhances efficiency and provides valuable support in the LLC formation process.

CLC
Rated4.6out of 5 based on24,906+ reviewson

Showing our favorite reviews