Ask a Business Lawyer. Get Business Law Questions Answered ASAP.
Hi, answering your questions in kind: does the subsidiary LLC have the limited liability for the holding company or is the holding company liable for the subsidiary? The purpose of starting a holding company is to separate various property by business purpose, and the only way to totally isolate the entities from a liability perspective is for the entities to have a completely different business purpose or completely different members and agents. Otherwise, you always have the risk of a creditor to the subsidiary claiming that holding company is a “mere instrumentality”. Common factors in piercing the corporate veil include - shared principal offices, interlocking officers or frequent interchanges of employees, that the subsidiary is the parent’s exclusive distributing arm (i.e., the subsidiary only does work for the parent), or the parent’s revenues are entirely derived from sales by the subsidiary. So your answer ultimately, will depend on what exactly you plan on doing with the subsidiary and how you can differentiate that from the purpose of the holding LLC and the extent to which you keep officers and agents separate among and between the entities. A creditor to the subsidiary only would have to show in a lawsuit that piercing the veil is necessary to prevent an injustice along with the above factors to get to the holding llc's assets; it is not automatic.
If you need clarification or have follow-up questions regarding this matter, I will be happy to continue our conversation – select the Reply to Expert or Continue Conversation button. If you are otherwise satisfied with my response, please leave a positive rating as it is the only way I am able to build my expert ranking. Thank you, XXXXX XXXXX wish you all the best with this matter.
DISCLAIMER: Answers from Experts on JustAnswer are not substitutes for the advice of an attorney. JustAnswer is a public forum and questions and responses are not private or confidential or protected by the attorney-client privilege. The Expert above is not your attorney, and the response above is not legal advice. You should not read this response to propose specific action or address specific circumstances, but only to give you a sense of general principles of law that might affect the situation you describe. Application of these general principles to particular circumstances must be done by a lawyer who has spoken with you in confidence, learned all relevant information, and explored various options. Before acting on these general principles, you should hire a lawyer licensed to practice law in the jurisdiction to which your question pertains.
The responses above are from individual Experts, not JustAnswer. The site and services are provided “as is”. To view the verified credential of an Expert, click on the “Verified” symbol in the Expert’s profile. This site is not for emergency questions which should be directed immediately by telephone or in-person to qualified professionals. Please carefully read the Terms of Service (last updated February 8, 2012).