Can You Have Multiple Businesses Under One LLC: Everything You Need to Know
Can you have multiple businesses under one LLC? That is a question serious entrepreneurs must know. For the most part, entrepreneurs are curious and driven. They are never satisfied with the status quo.3 min read
Can you have multiple businesses under one LLC? That is a question serious entrepreneurs must know. For the most part, entrepreneurs are curious and driven. They are never satisfied with the status quo. This is why they may start multiple ventures at the same time. Entrepreneurial restaurateurs may open a gift shop in their restaurant and fitness trainers may launch a line of active wear because they see an opportunity to make more money or better serve their client base. There are always new opportunities, and diversifying your business income is a good idea.
So, if you are thinking about opening a second business, you may wonder what the best method is for legally structuring each of them. Should you create separate corporations or LLCs for each or an umbrella company to hold them both? And, do you know how many companies you can form? You have to answer from both legal and marketing points of view. As far as marketing, you need to think about your target clients for each business. Are your ventures synergistic? Will they appeal to and are they relevant to the same customers? In some cases, your businesses may target different types of customers. When this is the case, you will need to use different business names, websites, and company branding.
Ways of Structuring a Business
Typically, you can structure multiple businesses in three ways. Each method has pros and cons.
Form a Corporation/LLC for Each Company
Using the first method, you create a separate business entity, either a corporation or an LLC, for each of your business ventures. So, you create an LLC for your computer consulting company and a separate LLC for your copywriting business. The first method seems simple, straightforward, and appropriate for structuring businesses that share no connection, such as a restaurant and a web-development company. However, the first method also requires you to fill out lots of paperwork and pay fees to form each business entity. Plus, with multiple business entities, you have to file separate documents like annual reports, taxes, and meeting minutes for both businesses.
Therefore, the first approach is not recommended by experts if:
- You do not want a lot of administrative responsibilities.
- You want to offset the losses of one company with the profits of your other businesses.
Some examples of when an expert would not advise forming a corporation or LLC for each business venture:
- If you are a property investor, you may want to create an LLC for all of your properties in order to make sure you protect each of your investments on its own.
- If you are in a high-risk business, forming separate business entities for each business is a sound strategy because it shields each of your businesses from the liability of your other ventures.
Create One LLC or Corporation, then File DBAs Under a Main Corp/LLC
Using the second method, you form a main LLC or corporation. Next, you file DBAs or fictitious business names under the business entity for each of the business ventures the company owns. You create a holding company like "My Business Ventures, LLC" and then you file DBAs for each of your ventures, like "ABC Accounting Consultants" and "Smart Mouth Music."
The benefit for filing the DBAs under one business entity is that all of your business ventures are taxed under the same tax ID number. You only have to file one set of compliance paperwork, like annual reports and meeting minutes. The downside is that if something happens to one of your business ventures, it can impact all your other businesses.
Create One LLC or Corporation with Corporations/LLCs Under a Holding Company
A holding company is another method. It is a main business entity, an LLC or a corporation, that owns LLCs or other corporations. If you choose this approach, you will create a holding company that owns each of the LLCs or corporations for your business ventures.
This strategy is preferred by established companies when they start a new business and by businesses that are planning to be acquired by another company. As you may expect, the tax and legal obligations are complex with this method. So, when using it, you should always consult a tax attorney or a CPA for advice on the best way to structure your holding company and its subsidiaries.
If you need help with structuring multiple LLCs under one business entity, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience.