My partners and I have started 2 mobile app development companies. We plan on starting more (an LLC per type of app we develop). We live and work in CA. To keep the cost of doing business at a minimum (and afford a greater level of corporate protection), my plan would be to, 1) Set-up a WY S-Corp, and register it in the State of CA. This corp would act as an umbrella/management company. Then, 2) Set-up a WY LLC for each app company with the umbrella company listed as the sole manager of each LLC. Is this the correct way to do this? The way I understand it, I would have to pay the $800 CA franchise tax on the S-Corp only. Is that correct?
Dear Jay,
I understand you would like to have each app in its own LLC for the purpose of limiting the liability to each app to itself. Also, I see some benefit in doing it this way if you want to sell the rights to those apps later on (in which case you would just sell its LLC).
Whether those benefits are worth the efforts and the cost of maintaining all those LLCs is another question. Generally, if you own all the apps with your holding company you would be able to sell the rights to them anyway (just as assets are sold). Also, depending on what type of apps those are, the liability might be minimal to justify the added level of business complexity. In other words, if you identify an app that could be “risky” you can organize it under its own LLC, while keeping the “low-risk” apps directly in your holding company.
Finally, if you are in California and plan to register there anyway you might want to skip the Wyoming step and just register a domestic CA LLC. Although there are many benefits in having a Wyoming LLC, you will be able to enjoy them anyway when you create WY LLCs for (some of) your apps. The management company would be just that ?? management company, located and registered in California.
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