Can one limited liability company own another limited liability company?

In most cases, yes. And a tiered structure can actually simplify your tax accounting and improve your liability protection. For example, a group of real estate investors might setup a "parent" limited liability company that, in turn, owns "child" limited liability companies. And each of the "child" limited liability companies would own a separate real estate investment property.

In such a tiered structure, the income and deductions of all the real estate investment properties would appear on one partnership income tax return for the parent--which would be darn convenient. And then each individual property would "live" inside its own individual limited liability company--which would mean that in a worst-case-scenario-situation, something really bad happening at one of the properties would affect only that property.

The bottomline? If you think a tiered structure with one limited liability company owning one or more subsidiary limited liability companies might make sense, you may want to explore your ideas and thinking with a good local attorney and smart CPA.

Let me close with a couple of additional comments:

1. States often have rather strict rules about who can and can't own interests in profession-type businesses such as medicine, law, dentistry, public accounting, architecture, and so on. If you're operating one of these businesses as an llc or a pllc (a professional limited liability company), state laws may influence how and when you can use one llc to own another llc.

2. Tax law has very strict requirements about what sort of taxpayer can and can't own an S corporation--which is one of the tax accounting options you have for most limited liability companies. Accordingly, if you think an llc might want to own an S corporation, you probably want to get some help from a tax practitioner.

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