Operating LLC vs holding LLC
A structural distinction between LLCs that conduct active operations and LLCs that hold assets.
Definition
Operating LLCs conduct active business operations (sales, services, employees). Holding LLCs hold assets (IP, real estate, equity stakes in operating entities) and do not directly operate. Asset-protection structures often separate operating from holding.
Context
Common multi-LLC structure: holding company at top, operating subsidiaries below.
Example
A founder forms two Delaware LLCs: Founder Holdings LLC (holds IP, owns 100% of operating LLC) and Founder Operations LLC (operates the SaaS business, licenses IP from holding).
Common pitfalls
- Inter-LLC transactions need transfer-pricing documentation.
- Veil-piercing risk increases with poorly maintained separations.
- More complex tax filings.