By Dr. Tamara Patzer
In brief: Owners can usually say what their companies earn but not who legally owns each one, how each is taxed, or what happens to the rest if one is sued. This feature turns a chapter of attorney Todd M. Villarrubia’s book into a ten-minute audit: holding and operating companies, tax elections, the new qualified small business stock rules, and the state-of-formation question.
Most owners can tell you what their companies earn. Far fewer can say, without looking, who legally owns each one, which tax election each has made, and what happens to the rest if one of them is sued. New Orleans tax attorney Todd M. Villarrubia built a chapter of his book, Entrepreneurial B.E.A.S.T. Mode™, around that gap. This piece turns the chapter into an audit any owner can run on a single sheet of paper.
Why Is Owning Everything In Your Own Name Risky?
Because a claim against one asset can reach the others. Villarrubia is blunt about it: “Personal ownership is the riskiest structure at scale.”
His book illustrates the point with a case study about a real estate investor who held roughly 1,100 properties across 20 states, all titled in his personal name. As the book tells it, an injury at one property could have reached everything else he owned. The fix described in the book did not change the properties at all. It changed how they were held: grouped into separate series LLCs by state, placed under holding entities, and tied into an estate plan. As the book puts it, “The assets themselves remained unchanged. Only the structure was modified.”
That case study is an illustration inside the book, and the results it describes are not a prediction for any other owner. Series LLC laws also differ by state, and not every state has one, so a property in a state without a series statute may not get the same protection. Whether separation works depends on state law, on how the entities are run, and on whether owners keep them truly separate in practice.
What Is The Difference Between A Holding Company And An Operating Company?
A holding company owns things, and an operating company does things. Villarrubia’s rule of thumb is short: “The principle is simple: separate entities for separate risks.”
In the structure he describes, a parent holding company owns interests in subsidiaries and does not run day-to-day operations. Each business line or major asset category sits in its own company. Intellectual property such as a brand or a patent can sit in its own entity and be licensed to the operating companies. The idea is that a dispute in one place does not automatically reach everything else.
Courts can look past separate entities when owners mix money, skip formalities, or treat the companies as one. A structure on paper is only the start. Keeping the separation real is the ongoing work.
Can The Same LLC Be Taxed In Different Ways?
Yes. The IRS says a domestic LLC with two or more members is treated as a partnership for federal income tax by default, and a single-member LLC is treated as an entity disregarded from its owner¹. An LLC can also file an entity classification election, Form 8832, to be treated as a corporation instead¹. The IRS describes Form 8832 as the way an eligible entity elects whether it is classified as a corporation, a partnership, or an entity disregarded as separate from its owner².
That is why the book says: “Every entity can be taxed differently depending on elections made with the IRS.” The legal form and the tax form are two separate choices, and an owner who has checked a box in the past may not remember which one was made. The audit below starts there.
Where Does Qualified Small Business Stock Fit In?
It can matter a great deal at an exit, but only if the company qualifies from the start. Qualified small business stock, under Section 1202 of the tax code, lets eligible owners exclude part or all of the gain on a sale. For stock issued after July 4, 2025, the exclusion is 50 percent after three years, 75 percent after four, and 100 percent after five; the cap on eligible gain rose from $10 million to $15 million, and the company’s gross assets limit rose from $50 million to $75 million³.
Stock issued before that date stays under the older rules, so owners with both kinds of stock need careful records³. Eligibility also depends on the type of business and the type of entity, which is why Villarrubia’s book treats the question as a planning issue to settle years before a sale, not at the closing table. Nobody should assume the exclusion applies to their company without advice on their own facts.
Does The State Where The Entity Is Formed Matter?
It can. Villarrubia’s book compares Delaware, Nevada, and Wyoming for different uses, describing Delaware as the choice for companies that want institutional credibility and outside capital, and Nevada and Wyoming as popular for privacy and creditor-protection rules. States differ on fees, disclosure, and how courts treat creditors of an LLC member, and a state’s rules can change.
An owner should ask a lawyer licensed in the relevant state which jurisdiction fits the actual business, where its owners and property are located, and where it will be sued if it is sued. Formation in a favorable state does not remove an owner’s duty to register and pay tax where the business operates.
The Ten-Minute Audit
The book ends its structures chapter with an exercise. Villarrubia asks owners to list every business entity they own, and then answer three questions beside each one: who holds voting control, who holds the economic ownership, and what the jurisdiction and tax status are.
Do it on one sheet. Most owners find at least one surprise: an entity they forgot, an election they never knowingly made, or a person whose name sits where it should not. Villarrubia describes the stakes in a sentence worth keeping on the sheet: “Wealth preservation depends not on what you own, but on how you own it.”
Frequently Asked Questions
What is a series LLC?
A series LLC lets one legal entity hold separate groups of assets, often called cells or series, with the aim of keeping liabilities apart. State law on series LLCs varies, so an owner needs local advice.
What is a family limited partnership?
It is a partnership in which senior family members keep management control while younger family members or trusts hold economic interests. The book covers it as one tool. It has legal and tax requirements and is not right for everyone.
How often should an owner revisit the structure?
There is no fixed rule. Revisiting it after any major event such as a sale, a purchase, a marriage, a divorce, or a move makes sense, along with a regular calendar check.
Does this article replace a lawyer?
No. It is general information.
Sources
- Internal Revenue Service, Limited liability company (LLC)
- Internal Revenue Service, About Form 8832, Entity Classification Election
- Jones Day, Qualified Small Business Stock Benefits Expanded in New Tax Bill
About the author. Dr. Tamara Patzer is a publisher and former newspaper editor. She was on the staff of The Charlotte Sun when it was named a 2005 Pulitzer Prize finalist for its Hurricane Charley coverage.
About the source. Todd M. Villarrubia is an attorney with an LL.M. in Taxation and a Juris Doctorate. He is an Accredited Estate Planner, a Board Certified Expert in Estate Planning and Administration, and a Fiduciary Investment Advisor Representative. He is the author of Entrepreneurial B.E.A.S.T. Mode™. Wealth Planning Law Group, 101 W. Robert E. Lee Blvd., Ste 404, New Orleans, LA 70124. Phone: 504-982-8207. Email: todd@lawealthplan.com. Website: Wealth Planning Law Group.
Disclaimer: Attorney advertising. Sponsored feature written on behalf of Todd M. Villarrubia. This article is general information, not legal or tax advice, and reading it does not create an attorney-client relationship. Results vary.
