I have a parent LLC in Wyoming and want to open subsidiaries in California and Texas. Is that legally possible? Do I need separate LLCs for each state, or can the Wyoming LLC just register as foreign in those states? I'm getting mixed answers from Google. Any real-world experience would help.
LLC structure
Can one LLC own several subsidiaries in different states?
Yes, an LLC can own other LLCs. That's just a parent-subsidiary structure. The subsidiaries would be separate legal entities formed in their respective states. You could also just foreign-qualify your Wyoming LLC in CA and TX, but then it's one company, not subsidiaries.
What Taco said. But be careful: California is brutal with the $800 minimum franchise tax for each entity. If you form separate sub sidiaries there, each one pays. If you just foreign-qualify the Wyoming LLC, it still pays. So either way, CA gets its pound of flesh.
I've done this. Parent LLC in NM owns three subs in AZ, CO, and UT. Each sub has its own EIN, bank account, and operating agreement. It's more paperwork but keeps liabilities separate. Just make sure you don't commingle funds or a judge will pierce the veil.
Why do you need subsidiaries? If it's just you running the show, foreign qualification is simpler and cheaper. Subsidiaries make sense if you have partners or want to sell one off later.
Good point. I have two business partners and we might want to spin off the Texas operation eventually. So separate subs might be worth it.
Then yes, go with subsidiaries. But watch out for Texas franchise tax – it's based on revenue, not just a flat fee. And each sub needs its own registered agent in its state.
I'm not a lawyer but I played one on TV. Seriously, talk to a business attorney. This is exactly the kind of thing that varies by state and can bite you later.
Also, if your parent LLC is taxed as an S-corp, owning subsidiaries can get tricky. S-corps can only own certain types of subsidiaries. If you're a partnership or disregarded entity, it's easier. What's your tax election?
Currently a partnership. We haven't elected S-corp yet.
Then you're fine. Just keep separate books and don't mix personal and business expenses. Also, some states require you to list the parent LLC as the member on the subsidiary's formation documents. Easy to miss.
And don't forget annual reports. Wyoming is cheap, California is not. Texas has no state income tax but the franchise tax still applies. Budget accordingly.