Partnership LLC majority-owning another Partnership LLC Question

[cbrant777]

What is the name of your state (only U.S. law)? Texas

My partner and I have an LLC (Delaware, registered in Texas as a foreign entity) that is going to provide the seed money for another business that will be an LLC (probably Texas). Our LLC would be 80% owner of the new LLC and the other 20% of equity will be split by the operators. On the surface, it seems straightforward but I wanted to check if there are any issues with this that I might not be aware of?

 

[FlyingRon]

Nothing as far as legally forming these things are. The partnerships-owning-partnerships (even when wrapped with LLCs) will have specific tax implications.

 

[latigo]

Nothing as far as legally forming these things are. The partnerships-owning-partnerships (even when wrapped with LLCs) will have specific tax implications.

A general business partnership "owning" an other of the same? I have a thought as to what they "are".

Considering the presence of reciprocal agency and the exposure of the participating partners' personal assets to not only the business creditors of the principal or "owning" company, but those of which it "owns" as well, a recipe for potential, individual, financial disaster!

 

[cbrant777]

A general business partnership "owning" an other of the same? I have a thought as to what they "are".

Considering the presence of reciprocal agency and the exposure of the participating partners' personal assets to not only the business creditors of the principal or "owning" company, but those of which it "owns" as well, a recipe for potential, individual, financial disaster!

Are you saying the operators/20% minority owners personal assets would be exposed to the majority owners "parent LLCs" creditors? Do you suggest a different type of entity for the starting (80/20) business?

 

[davew128]

A general business partnership "owning" an other of the same? I have a thought as to what they "are".

Considering the presence of reciprocal agency and the exposure of the participating partners' personal assets to not only the business creditors of the principal or "owning" company, but those of which it "owns" as well, a recipe for potential, individual, financial disaster!

Neither of the entities is a general partnership, they are LLCs. There are still potential problems, but unlimited liability on its face is not one of them.

 

[cbrant777]

Neither of the entities is a general partnership, they are LLCs. There are still potential problems, but unlimited liability on its face is not one of them.

Are the potential problems substantial?

 

[latigo]

Are you saying the operators/20% minority owners personal assets would be exposed to the majority owners "parent LLCs" creditors? Do you suggest a different type of entity for the starting (80/20) business?

All I'm saying and intend to say is that the individual "general partners" in a general business partnership, whether formally created or one imposed by law, are personally liable for the debts of the partnership. And that each such are able to separately bind the partnership to those debts where there is either express or apparent authority.

Furthermore, the negligence of a partner when occurring in the conduct and in furtherance of the business interests can also be attributed to the individual partners in the same fashion as does the reciprocal agency factor and the principle of respondent superior.

Lastly, this not the place to learn how to structure your business. Just avoid "partnerships" as you would AIDS!

 

[davew128]

All I'm saying and intend to say is that the individual "general partners" in a general business partnership, whether formally created or one imposed by law, are personally liable for the debts of the partnership. And that each such are able to separately bind the partnership to those debts where there is either express or apparent authority.

Furthermore, the negligence of a partner when occurring in the conduct and in furtherance of the business interests can also be attributed to the individual partners in the same fashion as does the reciprocal agency factor and the principle of respondent superior.

Let me repeat myself. NONE OF THE ENTITIES ARE GENERAL PARTNERSHIPS. THERE ARE NO GENERAL PARTNERS. That means YOU'RE WRONG ABOUT EVERYTHING. And not for the first time either.

Just avoid talking "partnerships" as you would AIDS when you don't know how they operate

Fixed it for you.

 

[FlyingRon]

Unless they are limited partners (which is a bigger can of worms), they are general partners. Lose the attitude. You appear to know EVERYTHING so you don't need our help.

 

[davew128]

Unless they are limited partners (which is a bigger can of worms), they are general partners. Lose the attitude. You appear to know EVERYTHING so you don't need our help.

Ron, you're smarter than that. There are no general partners in an LLC. The attitude was warranted.

 

[quincy]

... There are no general partners in an LLC ...

LLC owners are called "members" not "partners."

There are both tax implications and liability concerns in having a parent LLC and a subsidiary LLC.

For one example, if the parent LLC is sued, all money and assets of the subsidiary LLC are at risk as well. If the subsidiary LLC is sued, on the other hand, the parent LLC can escape liability.

Sitting down with a professional in your area to discuss the risks and benefits of your specific business and your plans would not only be smart, cbrant777, it is recommended.