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Question

About a year ago I started a company (an LLC - "parent company") that starts companies. I am 100% sole owner of the parent company. The premise is to form a team of designers, developers, and business folks around a business concept and run them through the process of de-risking the business (finding and acquiring customers). Once product/market fit is found, the idea is to spin the project out into its own entity/company (C corp) and continue the process of company building (E,g. raising money etc).

Our second project is ready to move onto the next phase and be spun out. My logic of starting the parent company was always to have my equity portion of the spun out company be owned by (refer back to) the parent company instead of having it under my personal name. [Side note - the other team members of this company would also get a percentage in the newly spun out company.]

From an accounting prospective does this approach make the most sense? Are there any flaws in this strategy?

Financial Accounting

Business Strategy

Answer

Mathieu Guerville answered

Some states in the US allow for what's called a Series LLC, where multiple companies are under a single entity

If you're the sole member of the LLC (Series or traditional) you may also be able to be a LLC for legal reason (liability protection) but a treated as a S-Corp for tax reason (more advantageous in many case)