Key Takeaways

  • Yes, a corporation can be a member of an LLC, as most states allow corporations and other business entities to own LLC interests.
  • This structure provides liability protection and can simplify tax and management structures for corporations managing multiple business ventures.
  • S corporations face stricter ownership restrictions than C corporations; they can own an LLC but must ensure the LLC doesn’t disqualify their S election.
  • When a corporation joins an LLC, the Articles of Organization must list the corporation’s legal name, address, and ownership percentage.
  • PLLCs (Professional LLCs) cannot have corporations as members because only licensed individuals in the relevant field may own them.
  • There are strategic benefits to corporate membership, such as asset protection, tax efficiency, and operational flexibility, but also considerations around compliance and tax filing complexity.

Can a corporation be a member of an LLC? Yes, limited liability companies are permitted by the state to have members (owners) who are individuals and/or other business entities. 

Who Can Be a Member of an LLC?

The Revised Uniform Limited Liability Act defines the allowances for LLC ownership in Section 102. LLC member types may be:

  • Individuals
  • Corporations
  • Business trusts
  • Estates and trusts
  • Agencies
  • Partnerships
  • Other LLCs
  • Associations
  • Joint ventures
  • Public Corporations
  • Government subdivisions
  • Any legal or commercial entities

Corporations and LLCs fall into different categories of business entities with different legal and financial rules under the state legislature. S Corporations are not actually business entities, like LLCs are, but they are a type of tax classification that LLCs and corporations can actually elect by filling out Form 2553 with the IRS.

S Corps and other corporations can be members by owning full or partial stock or interest in an LLC. 

States do not put very many restrictions on LLCs and their membership options. A corporation can not only be a member of an LLC but also isn't even required to be incorporated in the state that the LLC was formed in. 

LLCs can be formed by one or multiple members creating either a single-member LLC or multiple-member LLC. If an individual wish to form an LLC, they just simply file articles of organization with the Secretary of State (SOS). LLCs are regulated under state law in the state in which they were formed.

When a corporation acts as a member of an LLC, it holds the interest in the company and creates another layer of protection from liability of the shareholders of the corporation. The corporation's assets and subsidiary obligations are all protected through the liability protections within the LLC and within the corporation itself. 

Understanding Corporate Membership in an LLC

When asking can a corporation be a member of an LLC, the answer is generally yes. Both C corporations and S corporations are allowed to own membership interests in a limited liability company. This setup can help a parent corporation manage multiple ventures under one umbrella while maintaining liability protection for each business entity.

Each member of an LLC—whether an individual or a corporation—has an ownership percentage defined in the LLC’s operating agreement. The corporation’s ownership interest grants it the right to profits, losses, and voting power consistent with the agreement terms.

This arrangement is especially common in holding company structures, where a corporation forms separate LLCs for different projects or subsidiaries. Each LLC isolates liability, protecting the parent corporation’s other assets.

However, corporations acting as LLC members must still comply with state formation laws, file annual reports, and maintain separate accounting records for each entity to preserve liability protection.

Requirements and Restrictions for S Corp Ownership

S Corps are classified as disregarded entities and are therefore not subject to corporate taxes. In order for an LLC or any business entity to gain S Corp tax status (or subchapter S treatment), these rules must be followed:

  • The entity may not have more than 100 members, owners, or shareholders.
  • All members, owners, or shareholders must be state residents and citizens of the United States.
  • The entity must be legally formed with the Secretary of State or appropriate state division.
  • The entity cannot be an insurance company, bank, or certain other business types.

LLCs do not have many regulations for their membership, but PLLCs (professional limited liability companies) are required to only have licensed professionals in the field in which the company plans to offer services as members. So, corporations cannot act as members of a PLLC. 

Certain states don't require an LLC to list all of its members in its articles of organization. Some states don't require a list of members but many do require a list of managers.

Member-managed LLCs are managed by their members, so this type of LLC would end up having to list its members, as they're all managers. Manager-managed LLCs hire a third-party manager or appoint an individual from among their members to act as a manager. 

If a corporation is a member of an LLC, the corporation's business name, address, and ownership percentage will need to be listed in the articles of organization.

Tax Implications of a Corporation Owning an LLC

When a corporation becomes an LLC member, taxation depends on how the LLC is classified by the IRS. By default:

  • A single-member LLC owned by a corporation is treated as a disregarded entity, meaning its income is reported directly on the corporation’s tax return.
  • A multi-member LLC is treated as a partnership, and the corporation must report its share of profits and losses on its own corporate return.

For C corporations, this may lead to double taxation—once at the corporate level and again when profits are distributed to shareholders. However, the LLC’s pass-through taxation can reduce this issue if properly structured.

For S corporations, the ownership rules are more restrictive. An S corporation may own an LLC, but it must ensure that the LLC does not have ineligible owners (like foreign corporations or partnerships), or the S corporation could lose its tax status.

Additionally, both entities must maintain separate EINs, file state business taxes (if applicable), and may need to prepare a K-1 for the corporation if the LLC is taxed as a partnership. Consulting a tax professional is essential to ensure compliance and avoid accidental double taxation.

LLC Ownership

Basically any individual or company is permitted to file articles of organization with the state and therefore form a legal LLC.

Unless you are seeking S Corp tax status or trying to form a PLLC, you essentially have total freedom when seeking members to join your LLC. The loose member regulations and liability protection offered with an LLC actually makes it fairly easy to find members, because the risk is low.

Benefits of Having a Corporation as an LLC Member

Allowing a corporation to be a member of an LLC offers several strategic and operational advantages:

  1. Enhanced Liability Protection – Both corporations and LLCs shield owners from personal liability. When combined, this creates an additional protective layer between the individual shareholders and business obligations.
  2. Simplified Management of Subsidiaries – A corporation can manage multiple LLCs, each dedicated to different lines of business or regions, improving organization and risk control.
  3. Tax Planning Opportunities – The flexibility of LLC taxation allows corporations to structure ownership in ways that minimize overall tax liability.
  4. Credibility and Growth Potential – LLCs with corporate members often appear more established to investors, lenders, and partners.
  5. Ease of Expansion – Corporations can acquire partial interests in existing LLCs or form joint ventures through LLCs, facilitating mergers, partnerships, or strategic collaborations.

However, corporations should maintain formal separation between entities to avoid “piercing the corporate veil.” This means maintaining separate bank accounts, records, and legal documentation.

LLC Ownership of S Corp

LLCs cannot own any shares in an S Corp because the IRS has put much heavier restrictions on the shareholder requirements for S Corps. 

Only single-member LLCs may act as a shareholder in an S Corp, but LLCs with multiple members are not allowed. Because of these rules, LLCs frequently cannot qualify for S Corp taxation classification.

These limitations show why an LLC might want to actually be owned by an S Corp, rather than the other way around.

Common Structures Involving Corporations and LLCs

Several business structures involve corporations and LLCs working together, depending on the business’s goals:

  • Parent Corporation with Subsidiary LLCs: A C corporation may form multiple LLCs to operate different business lines under one corporate umbrella.
  • Joint Ventures: Two or more corporations may form an LLC together to pool resources while limiting liability.
  • S Corporation Owning an LLC: An S corporation can own a single-member LLC if it aligns with IRS ownership rules.
  • Corporation-Owned Holding LLC: A corporation may use an LLC to hold real estate or intellectual property, protecting core business assets.

Each arrangement offers benefits in liability protection, taxation, and operational control but requires careful planning and recordkeeping to comply with both state laws and IRS regulations.

If you need help structuring your business so a corporation can be a member of an LLC, you can post your legal need on UpCounsel. UpCounsel only accepts the top 5 percent of attorneys to its site, providing you access to experienced business lawyers for guidance on ownership structure, formation, and compliance.

Frequently Asked Questions

  1. Can a C corporation be a member of an LLC?
    Yes, a C corporation can be a member of an LLC in any state. This is common for parent companies creating subsidiaries for separate operations.
  2. Can an S corporation be a member of an LLC?
    Yes, but the LLC’s ownership structure must comply with S corporation rules to avoid jeopardizing S status.
  3. Does a corporation need to be in the same state as the LLC it joins?
    No. A corporation can be a member of an LLC formed in another state, though it may need to register as a foreign entity in that jurisdiction.
  4. Are there tax benefits when a corporation owns an LLC?
    Potentially. LLCs provide flexibility in tax classification, which corporations can leverage for strategic tax planning.
  5. Can a corporation be a member of a PLLC?
    No. Only licensed professionals in the same field can be members of a Professional Limited Liability Company.

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