One LLC Owning Another LLC

Hello there,

My business partner and I are in the process of buying a business. We want to set up one LLC to actually be the purchasing party.This will be a single member LLC in the name of my partner only.
We would then like to set up a second LLC that will hopefully act as the parent company and will own all of the assets of the original LLC.

How will I proceed with this set up. Will I need to set up the parent company first or at the same time.

Thanks

Answer

Setup the LLC to be owned by your partner first and purchase the business.

Then, form the second LLC.

You will then transfer ownership of the first LLC to the second LLC by having the second LLC purchase your partner’s membership interest (aka shares) of the first.

Now you will have LLC-1 whose membership interest is entirely owned by LLC-2. LLC-2’s membership interest will be owned by you and your partner in whatever proportions you decide.

You will need to memorialize these transfers in writing with appropriate legal documents.

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