How to Create Florida Holding and Operating LLCs
Forming Holding and Operating LLCs in Florida
If you’re interested in extra asset and liability protections for your Florida business, then it’s important for you to know a thing or two about Florida Holding and Operating LLCs. Essentially, the Holding LLC leases assets to the Operating LLC, protecting the actual business assets in the event that creditors come after the Operating LLC. Business owners typically prefer LLCs over corporations when deciding on a holding entity because LLCs offer superior asset protection.
What are Holding and Operating LLCs?
Florida Holding and Operating LLCs are two different Florida LLCs formed with the intention of one business entity owning (or holding) the other’s assets. Holding LLCs are an example of a parent company, with the Operating LLC serving as its subsidiary. The business assets belong to the Holding LLC, which leases those assets to the Operating LLC. The Holding LLC doesn’t conduct any actual business – that’s what the Operating LLC is for. There are multiple benefits to this kind of set up, most notably the added layer of liability protection, but there are other reasons worth learning about as well.
The Benefits of a Florida Holding and Operating LLC
Because the assets used by the Holding LLC are in fact owned and leased by the Operating LLC, those assets will be protected from creditors trying to collect on the Operating LLC’s debts. This is similar to how an LLC Member’s personal assets are protected if creditors come after their LLC. The Holding LLC is also better insulated from any potential legal liabilities that arise because of the Operating LLC’s actions. If you own multiple Florida LLCs, an Operating LLC can also be used to help centralize your business management responsibilities.
How to Form Holding and Operating LLCs in Florida
Forming your Florida Holding and Operating LLCs is easy. It doesn’t require anything special versus organizing any other Florida LLC, with the exception that you’ll need to file everything twice – once for each entity. That means filing two different Florida Articles of Organization with Florida’s Division of Corporations and pay the filing fees for each.
If you want to have an Operating Agreement for your Florida Holding and Operating LLCs (which we strongly suggest for several reasons), then you’ll need two of those as well. Don’t forget to check your federal, Florida state, and local licensing requirements as well. However, you can use the same Registered Agent for each LLC.
Asset Transfer Agreements and Asset Management for Florida Holding and Operating LLCs
Assets are transferred to your Florida Holding LLC by way of Asset Transfer Agreements. An Asset Transfer Agreement is a contract that legally changes ownership of the assets in question over from one company or individual to another. Then, you’ll use Lease Agreements that allow the Holding LLC to loan out equipment, intellectual property, or other assets for the Operating LLC’s use. Because of how valuable these assets are to your business efforts, it’s advisable to have an experienced Florida business attorney draft or review your Asset Transfer and Lease Agreements before proceeding.
Separate Assets and Follow Florida Law
Make sure that your Florida Holding and Operating LLCs are run as two totally separate and distinct businesses. Much like an LLC Member’s personal and business assets, the Florida Holding and Operating LLC’s finances can’t be comingled. Each entity will have its own tax and accounting responsibilities to satisfy, too, and will need to file its own Annual Report with the State of Florida each year. While this obviously means more work, its often worth the time invested – failure to follow these rules could cause you to lose your limited liability status and open you and your businesses up to unnecessary risks.
Our firm has helped business owners from all over our state launch Florida LLCs – including Florida Holding and Operating LLCs. That means that you can trust us with organizing your companies and preparing your Asset Transfer Agreement. Contact us today by calling (727) 279-5037 or by scheduling your consultation online.