How Many LLCs Can an S Corp Own?

S corporations and limited liability companies are two types of company entities that are common among small business owners. Both provide tax advantages and limited liability protection. But many business owners are curious about how many LLCs a S corp can hold when it comes to owning several companies.

The answer is complicated since a S corp is legally allowed to hold an unlimited number of LLCs. There are, however, monetary and tax ramifications to take into account. The following points should be remembered:

You can own a multi-member LLC as a S company, yes. The operating agreement of the LLC and the S corp’s ownership portion, however, will determine how the S corp is taxed. The LLC’s income will be reported on the S corp’s tax return if the S corp owns more than 50% of the LLC. The S corp will be taxed on its portion of the LLC’s income if it owns a minority stake.

Can You Run an LLC as a S Corp in this regard? You can operate an LLC as a S corporation, yes. You must submit Form 2553 to the IRS in order to elect S corp tax status. As a result, the LLC may be taxed similarly to a S corporation, which may result in significant tax savings. Be aware that having S corp status has additional compliance obligations, such as paying payroll taxes and making shareholder distributions.

Can a S Corp Own a S Corp in relation to this? Unable to own another S corporation, a S corp. S corporations are prohibited by the IRS from having any corporate stockholders, even other S corporations. This is done to avoid several pass-through taxation layers.

An S corporation may have subsidiaries, yes. The subsidiary’s organizational design, however, will determine the tax ramifications. If the subsidiary is a C corp, there will be double taxation because the shareholders will be taxed on any dividends they get in addition to the corporation itself being taxed on its revenue. The operating agreement of the LLC and the S corp’s ownership portion will affect how the income is taxed if the subsidiary is an LLC.

Finally, there is no statutory restriction on the number of LLCs a S corp may own. However, it’s crucial to take into account the fiscal and practical effects of owning many businesses. It is advised that you speak with a tax expert to figure out the ideal setup for your particular circumstance.