I’m always in awe of the many talents of today’s entrepreneur…the wedding photographer who also writes children’s books, the copy editor who sells homemade soap, and the stay-at-home mom who doubles as a part-time caterer and jewelry designer. Today’s creative professionals often find themselves making income through a creative patchwork of diverse interests and talents.
Take Sue as an example. She recently called into the office with no fewer than five ventures. She has been selling children’s clothing, handbags, and craft supplies on Etsy. After a few solid years on Etsy, Sue was now ready to take the next step and launch her own websites outside of Etsy, as well as expand into handmade paper goods and home décor.
She wondered about the proper way to structure these businesses and here’s where it gets interesting, since there are both marketing and legal factors to take into account. And often, they’re at odds with one another.
Consider your markets, marketing strategy, and target customers for each venture. Are they synergistic? Are they relevant and will they appeal to the same customer? If so, it makes sense to market them under a shared brand. In other cases, your businesses might target different customer types and your branding should reflect each unique market.
In Sue’s case, she preferred to keep each of her five businesses separate — different websites, business names, and branding. She wondered about the proper way to structure these businesses.
- Do I have to incorporate each business?
- Do I need to file separate tax statements for each business, or keep separate bookkeeping?
Technically, it’s possible to create a separate business entity for each venture. However, this can result in excess paperwork and legal filings. And in many cases, each business may not be earning a significant amount of revenue individually, making the paperwork seem especially tedious and the filing fees costly.
To save some headaches and paper, here are some steps to consider when dealing with multiple business types:
- Establish one main company (i.e. Big Enterprises) as an LLC or corporation within the state where your business will be actually physically located.
- Once the main company has been established, it files multiple fictitious business names (also know as a (DBA) “Doing Business As” registration) for each of the ventures within the same state/county. This way each of the smaller companies can reflect the branding and presence best for their specific markets, yet still enjoy the legal protection and under the umbrella of the main holding company (i.e. Big Enterprises).
- When filing your DBAs, it’s a good idea to also consider if you will be doing business under any other names as well— for example, Sue’s Stationery and SuesStationery.com are technically two different names and hence should each be listed within the DBA registration form when filing the DBA. This extra step is relatively easy and ensures you have all your legal ducks in a row.
- When it comes time for taxes, you can take the income earned from each DBA and report this in a single tax filing under the main LLC or corporation. As always, situations vary and you should always consider consulting with an attorney or tax advisor for individual advice regarding your particular situation.
You’re not legally required to disclose the parent company, meaning the website for Sue’s Stationery does not need to mention that it is part of Big Enterprises. However, as a general rule of thumb, this kind of public disclosure can enhance a small business’ legitimacy in the consumer’s eyes.
Taking the time to incorporate your business or form an LLC now will save you more time and money than you know in the future. You’ll have great peace of mind knowing that your assets are protected and your business is a solid legal entity. And for those entrepreneurs with multiple talents and businesses, you’re able to reduce your paperwork and bookkeeping requirements by legally structuring your company as one single entity, with multiple brands/names filed as Fictitious Business Names (also know as “Doing Business As” (DBAs) operating underneath the umbrella of your corporation or LLC.
Feel free to reach out to me at email@example.com with any questions. I would love the opportunity to help out!