What is a parent company?

A parent company is an entity that has a controlling interest over another company and owns more than 50% of the voting shares of the subsidiary company.

Thus, a parent company maintains a certain level of active control over the subsidiary company. This control can be "hands-on" (more control) or "hands-off" (less control), depending on the level of managerial control given to subsidiary managers.

On the bottom line, the parent company that controls the subsidiary company can either directly influence the business’ operations or have a more hands-off approach on ownership.

 

What is a Subsidiary?

A subsidiary company, also known as a daughter company, is owned or controlled by a parent company. The advantage of this type of structure is that it spreads their eventual risks across several companies.

By definition, subsidiaries are distinct legal entities for tax, regulation, and liability purposes. As a result, it is handled separately from its parent company, leading to a separate liability.

 

Can the parent company be the only member of my LLC?

If the LLC is owned 100% by the parent company, the owner of the parent company entity must be listed as the Responsible Party of the LLC in the EIN application.

It means that even though the LLC is owned by another entity, we’ll need to list a member (individual) as the EIN Responsible Party. So in this case, we must list one of the owners of the Parent company.

Please notice that LLC managers can't be the Responsible Party!

Who signs the SS4 form in my company: the parent company or the responsible party?

The responsible party will sign any documents on behalf of the company. Please note that this individual has to be a member of an LLC or has to behold an office position in a Corporation, such as a CFO/CEO/Secretary in the case of Corporations.

Very important to highlight that an entity is not allowed to sign on behalf of the subsidiary!

Can I use the SSN/EIN of the Parent company to form the subsidiary?

It is not possible to use the parent company's EIN or the SSN of the parent company's owner to expedite the process, only the SSN of a direct shareholder or member is accepted.