There may come a time when you decide to expand your business into an additional area of focus or take an online business to a storefront (or vice versa). Can you run both businesses under your existing LLC? The short answer is, “Yes, you can.” However, you have other options to consider before jumping in and handling things that way. The route you choose can impact you in several ways (including your liability and tax obligations), so it’s critical to do your homework and weigh the pros and cons.
I recommend talking with an accountant and attorney about your situation so that you get expert advice and direction on the legal and tax implications.
How to Structure Multiple Businesses Under One Roof
Let’s take a look at three popular ways to structure multiple businesses and explore how each scenario works.
1. Use One LLC to Run Both Businesses
One common approach involves having one LLC (usually named for the original/primary business)and then setting up a DBA or multiple DBAs (“Doing Business As,” also known as “fictitious name”) for the new venture(s).
As a hypothetical example:
Jonah has an LLC for his auto repair shop, “Jonah’s Vehicle Repair and Restoration, LLC.” He now wants to branch out and sell antique car parts online. He might opt to keep both business lines under his existing business entity but differentiate the new venture by filing the DBA “Back in Time Antique Car Parts and Accessories.”
In this scenario, the businesses can be run as though they are separate companies (with the ability to accept checks made out to their specific name). All the while, the business owner enjoys simplified business compliance requirements because there’s only one business entity (and one EIN) to maintain. Tax time remains relatively straightforward, too. The business owner reports income from the LLC and any DBAs that are part of it through a single tax filing under the main LLC.
The business owner has personal liability protection for both the original LLC and any DBAs filed for it. Using our hypothetical friend Jonah as an example, Jonah’s personal assets will be shielded (under most circumstances) if either his LLC or DBA business is sued or cannot pay its business debts. Note, however, that the LLC and DBA are considered one entity. Therefore, both business lines’ assets are at risk if one or the other runs into legal or financial distress.
2. Create Independent LLCs for Each Business
Many business owners choose to form a new LLC for each of their business ventures. In most states, there are no restrictions on how many LLCs an entrepreneur may create. For example, our friend Jonah may decide to form an independent LLC for his online antique car parts business while running his vehicle repair shop LLC separately.
What’s the advantage of separate LLCs? It isolates the risk for each individual business. So, if someone sues Jonah’s auto repair LLC, his online antique car parts LLC’s assets will be protected, and vice versa.
What’s the downside of this approach? It comes with additional compliance fees and paperwork. For example, creating separate LLCs requires filing Articles of Organization for each company, maintaining separate operating agreements, and filing whatever ongoing reports and fees are required for each LLC. Each LLC must also obtain its own EIN and business licenses and permits, and each must maintain its own records and bank accounts.
3. Create an LLC Holding Company With Individual LLCs Under It
Another option for running multiple businesses is to create individual LLCs for each of the businesses and then put them under one parent LLC that acts as a holding company. Typically, a holding LLC will have administrative significance, but no direct operations tied to it. Rather, it will own the assets required to operate the LLCs beneath it.
This scenario may be attractive when a business owner is looking to sell a business line or spin-off one of their businesses. It may also be beneficial for an established company that wants to fund starting a new business.
Using Jonah as our example again, in a holding company with LLCs 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.”
Essentially, structuring multiple businesses this way offers protection for the individual LLCs against the lawsuits and debts of the other LLCs and liability protection for parent LLC owners.
The tax and legal impacts of this option can get a little complex, so it’s advisable to consult with a tax advisor or attorney when structuring businesses as a parent company and subsidiaries. Creating and running multiple LLCs involves filing Articles of Organization for each company and having separate LLC operating agreements. Each LLC must maintain its own records, bank account, payroll, and tax documents.
Can an LLC Own Another LLC?
Yes, as I described in option three above, one LLC can own another. LLC members (owners) may be individuals or business entities, such as an LLC or corporation. Structuring multiple business ventures this way is common among real estate investors and developers who wish to keep the liability risks of individual properties from affecting the assets of the other properties they own.
Realize that having a parent LLC and subsidiaries doesn’t completely insulate business owners from liability. When a parent LLC is sued, all of that LLC’s assets, including those of its subsidiary LLCs, are at risk. Also, a business owner’s personal assets will be at risk if someone sues the owner for personal negligence or because that owner personally guaranteed a business loan that the LLC has defaulted on.
How to add a DBA to an LLC?
As I mentioned earlier, one option for running multiple businesses under a single LLC is to set up DBAs (fictitious names) for additional lines of business or locations.
Different government agencies have different names for their form to file a DBA. For example:
- “Registration of Fictitious Name” in the state of Pennsylvania
- “Fictitious Business Name Statement” in Los Angeles County, California
- “DBA -Business Name” registration in the state of South Dakota
- “Certificate of Assumed Name” in the state of New York
In addition to submitting the DBA registration form and paying the initial filing fee, usually, businesses must also place a notice in local publications (as required by the issuing authority) to announce its use of the DBA.
Many states and counties require that DBAs be renewed after a period of time. Several examples include:
- Florida – Every five years
- Texas – Every ten years
- New York – No renewal required
CorpNet is here to make filing a DBA simple and hassle-free by:
- Doing a preliminary name search to ensure the fictitious name you want to use is available.
- Preparing and filing the DBA form with your state or county.
How Many DBAs Can an LLC Have?
Typically, states and counties do not restrict the number of DBAs an LLC may have. The LLC must register, pay for, and publish a notice separately for each individual DBA it wishes to use.
Can Two Businesses Have the Same Name?
- An LLC’s registered business name is protected within the state, thus preventing entities with the same (or confusingly similar) name from using the name.
- If a business name is a registered trademark, the name is protected in all 50 states.
- Filing a DBA does not legally protect the name, but it may deter other businesses from using the name.
Generally, two businesses may have the same or similar name if they don’t participate in delivering the same types of products or services or serve the same channel of commerce.
Final Thoughts on Multiple Businesses Under One LLC
While running multiple business ventures under the umbrella of an existing LLC offers a degree of simplicity and avoids multiple business formation fees, the matter of liability risk to the business and business owners is something to think about carefully. To recap:
- Using a single LLC to run other businesses (distinguished by DBAs) is simple and low-cost to set up administratively. However, it means that the LLC is liable for any lawsuits or debts of the DBA businesses.
- Creating separate LLCs for each business requires the time and cost to register individual business entities. This route insulates each company from the lawsuits and debts of the other LLCs.
- Creating a parent LLC with multiple LLCs is more complex administratively and requires registering multiple entities. However, it may have advantages from liability protection and tax standpoints, depending on the situation.
I know there’s much to think about! That is why I encourage you to seek the advice of an attorney, accountant, and tax advisor so that you make an informed decision about which route to travel when starting multiple businesses. And remember, no matter which method of structuring multiple businesses that you choose, CorpNet’s team of filing experts can save you time and money when starting your new ventures.
Ready to start a new LLC or file a DBA–fast and affordably? Contact us today!