What is the recommended business structure forcompanies owning other compamies?

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What is the recommended business structure forcompanies owning other compamies?

I would like to create a parent company group (LLC), and then create two other companies (INC) that are majority owned by the parent company with other individual minority owners for each of the sub-companies or subsidiaries. Is this recommended, and if so, what is the correct procedure? Or if this is not recommended, what is the optimal or correct process to handle this type of structure? I basically have a group of individuals I always do business with and want them in the parent group. Each of the other businesses have individual persons that would like to be in one of them.

Asked on May 13, 2011 under Business Law, California

Answers:

M.T.G., Member, New York Bar / FreeAdvice Contributing Attorney

Answered 10 years ago | Contributor

The structure that you are considering is - as you so correctly put them: subsidiaries - is not, as you know, original or uncommon in corporate America.  But how one structures them will in part depend on the type of company or companies that what their business ventures are.  You should try and avoid anything that could cause potential conflicts of interest (and having certain people be a part of certain companies or sit on the boards of directors of various companies) could in fact be seen from the outside looking in as potentially conflicting.  If this is a company or companies that are public or regulated (like securities) then there are a whole host of other laws to be concerned about.  I would suggest that you go to see an attorney that specializes in these areas and speak with hi or her on the best way to navigate this.  Good luck. 


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