Can you have multiple businesses under one LLC?
Yes, you can have multiple businesses under one LLC. While it is possible to operate multiple businesses under one LLC, there are also other options to take into account depending on your particular business situation.
There are various ways to structure your LLC, depending on whether you are growing your company, restructuring it, or perhaps focusing on a completely different market or area.
It is wise to be aware of your options and weigh the benefits and drawbacks because the type of structure you select will affect your tax obligation.
Please read on.
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Is It Possible To Run Multiple Businesses From One LLC?
You might eventually decide to turn your online business into a brick-and-mortar store (or vice versa) or broaden your business’s area of focus. Business owners may wonder if they can operate more than one LLC due to these shifting operations. The short answer is, yes, you can operate multiple businesses under one LLC.
You do, however, have a variety of options to think about before you dive in. You may be affected by the path you take in a number of ways (including your liability and tax obligations), so it’s important to do your research and weigh the benefits and drawbacks. To get professional guidance on the tax and legal ramifications of your situation, I advise speaking with an accountant and an attorney.
Possibilities For Owning & Running Multiple Businesses
Let’s examine three common ways to organize multiple businesses and examine each scenario in turn.
Use One LLC To Run Both Businesses
One typical strategy entails creating a DBA (short for Doing Business As) or multiple DBAs for the new venture(s) and then creating one LLC (typically named for the original or primary business).
That was a mouthful, so let’s look at a fictitious instance:
- Jonah has an LLC for his auto repair shop, called Jonah’s Vehicle Repair and Restoration, LLC.
- He now plans to expand and start an online store to sell vintage auto parts.
- He might opt to keep both business lines under his existing LLC but differentiate the new venture by filing the DBA for Back in Time Antique Car Parts and Accessories.
The businesses can be operated as though they were separate businesses in this case, which has many benefits:
- Both businesses are able to accept checks made out in their respective names.
- Because there is only one business entity (and one EIN) to maintain, the owner’s business compliance requirements are streamlined.
- It’s still pretty simple to file taxes. A single tax filing under the main LLC is used by the business owner to report income from the LLC and any DBAs that are a part of it.
- Both the initial LLC and any DBAs registered for it provide personal liability protection for the business owner.
In the case of our fictional friend Jonah, if either his LLC or DBA business is sued or unable to pay its debts, Jonah’s personal assets will be protected (in most cases). But keep in mind that the LLC and DBA are treated as a single entity. As a result, if either one of the business lines encounters legal or financial difficulties, the assets of the other are also at risk.
Create Independent LLCs For Each Business
For each of their business ventures, many business owners opt to create a new LLC. There are usually no limitations on the number of LLCs a business owner can form. For instance, our friend Jonah might choose to establish a separate LLC for his online antique car parts business and manage it separately from his LLC for his auto repair business.
There are benefits and drawbacks to this situation, which include:
- Independent LLCs separate the risk for each distinct business. So, if someone sues Jonah’s Auto Repair LLC, his online antique car parts LLC’s assets will be safeguarded, and vice versa.
- There are additional compliance costs and paperwork involved. Separate operating agreements must be kept up-to-date, separate articles of organization must be filed for each business, and each LLC must submit any ongoing fees and required reports.
- Additionally, every LLC needs to get a unique EIN.
- Every LLC is required to obtain and keep up-to-date with its own business licenses and permits.
- Each LLC is required to keep its own books and accounts.
Create A Holding Company With Separate LLCs Under It
Another option for managing multiple businesses is to set up separate LLCs for each of them and then combine them under a parent LLC that serves as a holding company. A holding LLC typically won’t be directly involved in any operations, but it will be important administratively. It will instead be the owner of the equipment needed to run the LLCs underneath it.
Using Jonah as our example again, in a holding company with an LLC structure, he might form Jonah Enterprises, LLC as a parent LLC, which then owns Jonah’s Vehicle Repair and Restoration, LLC and Back in Time Antique Car Parts and Accessories, LLC.
In this situation, we benefit from the following:
- If a business owner wants to sell a business unit or spin off one of their companies, this scenario might be appealing.
- An established business that wants to fund the launch of a new venture might also find it advantageous.
- This method of structuring multiple businesses offers liability protection for parent LLC owners as well as protection for individual LLCs from lawsuits and debts of the other LLCs.
There are some drawbacks to this scenario as well:
- When structuring businesses as a parent company and subsidiaries, it’s advisable to seek advice from a tax advisor or attorney because the tax and legal implications of this option can become a little complicated.
- Creating and managing multiple LLCs requires filing separate Articles of Organization and having unique LLC operating agreements.
- Each LLC is required to keep its own books, accounts, payroll, and tax records.
Run Both Businesses Under One LLC Using A DBA
Consider a scenario in which you already have an LLC but want to expand into a different service or area of expertise within the same market.
You may establish a DBA (doing business as) or multiple DBAs as an alternative to forming a brand-new LLC.
Let’s say you currently sell pet supplies online in addition to your pet grooming business, Joyful Pet Grooming, LLC.
You can simply file a DBA under the name “Joyful Pet Supplies” rather than setting up an independent LLC for the online pet supply store.”
This scenario has the advantage that both businesses can be operated independently, allowing you to accept checks made out to their specific names and keeping separate accounting records.
Due to the DBA’s affiliation with the LLC “Joyful Pet Grooming, LLC,” you are only required to submit a single tax return for both businesses when tax season comes around.”
This makes tax preparation simple and easy.
The LLC’s pass through tax benefits (from both businesses because they file a single return under the main LLC) and liability protection benefits continue to be received by the business owner.
All of this sounds wonderful, but this situation has one drawback: because both businesses are under the same LLC, they are regarded as one corporate body.
As a result, if your online pet supply business doesn’t perform as well as expected and you are unable to pay off the supply inventory for which you have incurred debt, this will also have an impact on your grooming business.
In the event that one of the businesses is sued or has financial difficulties, both your grooming business and your online pet store will be equally impacted. As the owner, however, your personal assets will be protected.
The only way to prevent this is to set up two different LLCs, one for each business.
Run Multiple Businesses Under One LLC
Pros:
- easy to test business models, products, offerings, etc.
- initially simpler (but not if things grow)
- lower costs (one articles of organization and one LLC annual report)
Cons:
- liability risk could be larger (all liability under one “roof”)
- non-separate finances and books could be confusing
We typically observe two groups of readers for us.
• The first is those who have little money, perceive their risk to be high, and are testing out business models and how to make money. They frequently operate multiple businesses out of the same LLC.
• The second is a more experienced business person. They are either confident in what they are doing or have established profitability. They chose to create two LLCs, keep the liability separate, and “do it right” from the beginning.
Despite the fact that there are more advantages than disadvantages in the list above, more seasoned business owners frequently decide to separate their liability exposure by creating a different LLC for each business.
A LLC May Not Possess Another LLC
One LLC may own another, as I explained in option three above. Individuals or corporate or LLC entities may be LLC members (owners) in an LLC. Real estate investors and developers who wish to prevent the liability risks of specific properties from impacting the assets of the other properties they own frequently structure multiple business ventures in this way.
Understand that a parent LLC and subsidiaries do not entirely shield business owners from liability. All of a parent LLC’s assets, including those of its subsidiary LLCs, are at risk when that LLC is sued. Additionally, if an LLC owner is sued for personal negligence or because they personally guaranteed a business loan that went bad, their personal assets could be at risk.
How To Add A DBA To An LLC?
Setting up DBAs (fictitious names) for additional business lines or locations is one way to manage multiple businesses under a single LLC, as I previously mentioned.
The name of the DBA filing form varies between government agencies. Here are some examples of language from four different states:
- Registration of Fictitious Name is used in the state of Pennsylvania
- Fictitious Business Name Statement is used in Los Angeles County, California
- DBA Business Name registration is used in the state of South Dakota
- Certificate of Assumed Name is used in the state of New York
Businesses must publish an advertisement (as required by the issuing authority) in local publications to announce their use of the DBA in addition to submitting the DBA registration form and paying the initial filing fee.
DBAs must frequently be renewed according to state and local laws. Examples include the following:
- Florida requires DBA renewal every five years
- Texas requires DBA renewal every ten years
- New York requires no DBA renewal
All of that may seem overwhelming, but it doesn’t have to be. CorpNet can help make registering a DBA quick and easy by:
- To make sure the fictitious name you want to use is available, conduct a preliminary name search.
- preparing and submitting the DBA form to your county or state.
How Many DBAs Is An LLC Allowed To Use?
The number of DBAs that an LLC may have is typically unrestricted by states and counties. For each unique DBA it wishes to use, the LLC must sign up, pay for, and publish a notice separately.
Two Companies Sharing The Same Name Is Permissible
Usually, if two companies don’t participate in providing the same kinds of goods or services or cater to the same channel of commerce, they can have the same or a name that is similar to theirs.
Here are some situations to keep in mind:
- The registered business name of an LLC is shielded from use by other entities in the state that have the same (or confusingly similar) name.
- A company name is legally protected in all 50 states if it is a registered trademark.
- Although registering a DBA does not give legal protection to the name, it may stop other companies from using it.
If a business name is available or has already been legally registered by another company, CorpNet’s corporate name search and trademark search tools can help you find out.
A Series LLC, What About It?
Since there is only one annual Franchise Tax payment to the State of Delaware and one annual Registered Agent Fee, some people look into the low-cost series LLC when they want to run multiple businesses.
When dealing with a series LLC, there are frequently many obstacles to overcome because the structure of this business entity is relatively new and unproven. The series concept is still unfamiliar to many service providers, banks, attorneys, accountants, and other businesses. It frequently takes time to explain the series concept and to get the necessary documentation approved, for instance, by the lending division of a bank. It is generally thought to be safer and wiser for people to keep their business ventures completely separate from one another by establishing an LLC for each aspect of a business; in essence, what you are doing is creating one Delaware LLC as a holding company, and other, individual LLCs within it, yet separate from it.
Separate LLCs For Separate Businesses
Currently, the tried-and-true method of establishing unique LLCs for each variation of a business is still the one that is most frequently advised by tax experts, lawyers, and business consultants around the globe.
This means that clients frequently consider creating separate, traditional LLCs for each area of the business, each product line, each service offered, and each piece of real estate owned. By doing this, each LLC’s assets, obligations, and liabilities are totally segregated from one another and protected in the event of any future litigation.
It can be very beneficial when creating multiple LLCs to create a blueprint hierarchy that corresponds with the relationships between the various LLCs. For instance, when developing real estate, people frequently create numerous LLCs.
In this structure, one parent LLC—let’s call it ABC Holding Company, LLC—is typically found at the top of the hierarchy. The next step is to create multiple sibling LLCs, one for each actual piece of real estate; for simplicity, let’s call them ABC Real Estate 1, ABC Real Estate 2, and ABC Real Estate 3.
Although all LLCs share the same holding company—ABC Holding Company, LLC—and may have comparable structures, ownership interests, assets, and liabilities, they are all protected from one another in order to safeguard the assets and resources of each individual LLC. Each LLC may own, manage, and be accountable for a single piece of property.
This is also regarded as a shrewd, calculated way to further safeguard your private assets from your LLCs.
Please get in touch with us by phone (800-345-2677), Skype (DelawareInc), email, or live chat if you have any questions or would like more information about forming your own businesses. We’ll be happy to help you with one of our knowledgeable business startup specialists.
Conclusion
If you choose to create multiple LLCs, you should open separate LLC bank accounts in order to keep all business transactions apart from one another.
You should also maintain a different set of books. An online program like QuickBooks Online or a spreadsheet can be used to accomplish that.
We hope this article has been useful in providing a general overview of whether multiple businesses should be operated under one LLC or multiple LLCs.