Series LLC vs Holding Company

At a glance series LLCs and holding companies serve the same purpose. They are both businesses created with the intention of existing in a parent company and operating companies structure for asset protection and tax benefits. For the most part this is correct, but there are a few differences that can make one better for each unique situation.

Series LLCs

Series LLCs are limited liability companies that are part of a larger group of LLCs. Each series is a separate LLC and is legally distinct, offering limited liability despite the connection between the LLCs. This limited liability is the same for any other LLC, if one of the series LLCs were to be sued, it would not affect the other series LLCs. Series LLCs are often built from an original LLC (known as the base or parent LLC) from which other Series LLCs are created.

The main purpose of a series LLC is to protect assets in the same way as separate LLCs while providing significant structure in order to ease the management of all the series LLCs compared to other legal structures.

Holding Companies

A holding company is an entity that owns other businesses and assets.. It’s typically positioned between the operating company and the individual shareholder, and it owns the operating company’s voting stock and assets, and controls its management and policies. Holding companies do not participate directly in any business affairs other than their ownership, and instead leave those responsibilities to the subsidiaries they own

Which is better?

There is no clear answer as to whether series LLCs or holding companies are the better choice for a business. The additional control offered by series LLCs can be significant for certain business ventures, however due to some legal uncertainties caused by the relative new-ness of series LLCs, it may be inadvisable to rely on a series LLC for effective asset protection. For this reason, a holding company may be a preferable choice for many business owners.

As the legal situation around series LLCs become more clear they may become preferable to the operation of a holding company, but currently holding companies are more reliable in the protection of assets and for limited liability.