Can an LLC be a founder of an LLC?
A limited liability company (LLC), together with business partnerships and other types of business companies, is a commercial structure, i.e., an organization whose main purpose is to make profit and distribute it among participants. Creating an LLC is the most common organizational and legal way to create a commercial organization in private economic practice. This is also due to the fact that Russian legislation does not place high demands on their activities. In accordance with the current Civil Code of the Russian Federation, it is possible to create a limited liability company in two ways:
- Establishment - the creation of a new LLC;
- Reorganization of an existing legal entity.
This raises the question, can an LLC be a founder of an LLC? Under current civil law, the founders of an LLC can be legal entities and individuals.In this case, it is allowed to create a company to one person, in this case, the founder will be the only participant in a limited liability company.
There is only one provision, in clause 2 of Article 7 of the Law on LLC and clause 2 of Article 88 of the Civil Code of the Russian Federation, which prohibits a limited liability company from being the only founder of another company consisting of one person.
Such a restriction is made in order to avoid the possibility of the emergence of several legal entities whose only participant will be the same person who manages these legal entities and is not responsible for property obligations. First of all, according to Art. 56 of the Civil Code of the Russian Federation, this is responsibility for the obligations of a legal entity, the bankruptcy of which is caused by the instructions of the founder, as well as the main company for the property obligations of a subsidiary (Article 105 of the Civil Code of the Russian Federation).
Answering the question whether an LLC can be a founder of an LLC, the conclusion will be unequivocal - maybe, given the above limitations.