How Many LLCs Can One Person Have: Everything You Need to Know
Creating multiple LLC entities is a topic that many business owners all across the United States want to learn more about. 3 min read
Creating Multiple LLC Entities
Creating multiple LLC entities is a topic that many business owners all across the United States want to learn more about. As long as the businesses are distinct and separate, there is no limit to how many LLCs a single individual can create.
A business owner has to comply with the formation requirements for every LLC that he creates. To form an LLCs one has to file a Certificate of Organization, separate for each LLC. Different LLCs must have different names. However, the agent, accepting the legal documents, and the business address can be the same for all LLCs.
Acquiring Existing LLC and Membership Interest
There are no legal restrictions on the number of existing LLCs, in which an individual may have a membership interest. However, most LLCs have an operating agreement that outlines the requirements for receiving a membership interest. Therefore, it is possible for operating agreements to impose restrictions on the number of membership interests an individual can attain.
In the absence of an operating agreement, the minimum requirement for becoming a new member is the unanimous consent of its current owners. Existing members may require that a new member contributes property or cash to the company. He may also promise to make future contributions or to provide services.
Some LLCs restrict a member's ability to obtain an interest in a competing LLC as a requirement for membership.
Forming an LLC and Maintaining Multiple LLCs
An LLC needs to have an operating agreement detailing the management policies of an LLC as well as the rights and responsibilities of its managers and members.
In order to form multiple LLCs, the owner needs to pay the filing fee and complete the formation paperwork for each company. In some states, the LLC also needs to pay an annual fee and file a separate annual report for each company. They also need to have their own bank accounts and maintain separate business and financial records.
Conflicts of Interest of Owning Interest in Multiple LLCs
The owners of an LLC need to follow a standard of conduct that imposes fiduciary duties on its members.
Many LLCs require that members remain loyal by not engaging in activities that compete with the company. The members also need to avoid self-dealing when it comes to LLC business.
If a member violates the duty, he will be personally liable for the the loss or damage to the company caused by his actions.
If a person attains multiple LLCs, he may have a duty of loyalty to each company. This duty of loyalty may limit the ability of a member to actively participate in each business in the case of similarities in operation.
Is Owning Multiple Companies a Good Idea?
Owning multiple companies can make things complicated for a business owner, because he may have a duty of loyalty to each company. The owner may struggle to avoid violating the duties to one company, while actively participating in the operations of another company.
For example, a business owner has a membership interest in a linen supply company and a hotel. He wants to establish a contract to have the linen supply company provide linens for the hotel. However, the owner may not be able to do this because his benefiting from such a contract would be a violation of the owner's duties to the hotel.
Some states allow these types of deals as long as the owner is honest about the conflict and the other members don't mind. The nature of the duties of an LLC member differs from state to state.
Some examples of duties are the following:
- Duty of loyalty
- Duty of trust
- Duty of care
A common misconception that many people harbor is that it is against the law to be a part of multiple LLCs. However, there are no federal or state laws dictating the number of LLCs an individual can have. Regardless of this, it may be difficult, or even impossible, for an individual to actively participate in each LLC due to fiduciary duties.
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