If you want to start multiple ventures, or your business naturally expands to additional focus areas, shifting operations can lead a business owner to want to create numerous businesses under one LLC. It’s possible to operate several businesses under one LLC, but there are several issues to consider, and the route you choose has a significant impact on everything from your personal liability to your tax obligations.
Your LLC options
There are three core ways to structure separate businesses, exploring how each scenario works.
One LLC to run two businesses
One popular approach involves having one limited liability company (the ”original” or primary business) and then setting up a DBA (shorthand for “doing business as”) or multiple DBAs for new businesses. This is a great method if you have a core brand, such as a domestic cleaning business, and want to branch out into a specialism (i.e., oven or carpet cleaning) and use a new name while remaining connected to your original brand.
The different businesses can be run separately but with some advantages, for example:
- EIN requirements are simpler because there’s only one legal business entity.
- Both companies can accept checks made out to their specific name.
- Tax time isn’t complicated; the business’s tax filings are maintained under the main LLC.
The business owner retains complete limited liability protection, but you should remember that they’re considered one entity, so if the DBA or LLC is sued, the assets of both are at risk.
Create independent LLCs for each business
Creating individual LLCs for each business venture is another option; in most states, there aren’t any restrictions on how many LLCs an entrepreneur can own. There are key advantages and disadvantages to this, though, including:
- Independent LLCs isolate the risk for each business, so if someone sues LLC A, LLC B is safe from any liability or judgment made against LLC A.
- Running multiple LLCs can be complicated, there are additional compliance fees and paperwork; for example, creating separate LLCs requires filing Articles of Organization for each company, maintaining individual Operating Agreements, and filing ongoing fees and reports for each LLC.
- Every LLC will require its own EIN, for tax returns, etc.
- Every LLC needs its own licenses and permits.
- Every LLC must maintain its financial records and bank accounts.
Creating a holding company
Another option is creating individual LLCs for every part of the business, putting them under one parent LLC that acts as a holding company. Typically, a holding LLC has administrative significance, but no direct operations exist. There are some advantages and disadvantages.
- This scenario attracts business owners looking to sell a business line or create a spin-off.
- It can be beneficial for established business entities that want to fund a new startup.
- Structuring this way protects each LLC; the debts and liabilities incurred by each LLC won’t affect others.
There are some key disadvantages, though:
- The legal impacts and tax dynamics can be complicated, so it’s a good idea to consult a tax advisor or attorney when structuring your business as a parent company and subsidiary.
- Creating/running several LLCs involves filing separate formation documents for each company, including LLC operating agreements and articles of organization.
- You may need several business licenses.
- Every LLC needs its own records, payroll, tax documents, and bank accounts.
Can an LLC own another LLC?
In the scenario above, LLCs can own other LLCs; LLC members (owners) may be individuals or business entities. Corporations may also own LLCs. Real estate developers and investors who want to protect themselves from liability risks commonly use this method. In that case, individual property liability won’t affect the assets of the other properties they own.
Parent LLCs don’t completely protect owners from harm – when a parent LLC is sued, all of the LLCs assets (including subsidiaries) may be at risk. If the business owner was personally negligent or they guaranteed a loan, they could incur liability.
Adding a DBA to an LLC
One option for running several ventures under one LLC is setting up DBAs (fictitious names) for additional business locations or ventures. Different government agencies and states may have different names for the process; here are some examples:
- Registration of Fictitious Name (Pennsylvania)
- Fictitious Business Name Statement (California)
- DBA Business Name Registration (South Dakota)
- Certificate of Assumed Name (New York)
Businesses may be required to place a notice in local publications (at the request of the issuing authority) to announce their use of the DBA. Many states also require DBA renewal; some examples include:
- Florida: 5 years
- Texas: 10 years
- New York: Never
An array of business formation services can help you with DBA filing or renewal. You can hire a service to perform it by:
- Business name checks to ensure the name you’re using is available.
- Preparing and filing the DBA form for your state/county.
How many DBAs can an LLC have?
There are typically no limits; an LLC can have an unlimited amount of DBAs.
Can two businesses have the same name?
Generally, it depends. Two businesses can have a similar name if they don’t offer the same services, etc. Or if it’s registered in a different state. But this varies.
- An LLC’s registered name is protected in the state of registration, preventing entities with the same (or very similar) from using the name.
- If a business name also holds a registered trademark, the name is protected across the USA.
- Filing a DBA doesn’t legally protect the name but can deter other businesses from using the name.
Corporate name search tools can help you identify whether a business name is available.
Running multiple businesses under one umbrella of an existing LLC offers simplicity and avoids multiple business formation fees and liability/risk to the business and owners’ personal assets.
Using a single LLC to run other businesses (with DBAs) is low-cost and simple to set up administratively. However, the LLC is liable for any lawsuits against the DBA.
Creating separate LLCs for each business requires time and cost to register each entity; it’s also more complicated to administrate but does insulate each company from the lawsuits and debts of the other LLCs.
Creating a parent LLC with several LLCs is more complicated. However, depending on the situation, it can offer tax benefits and advantages from liability protection and tax standpoints.
Whichever option you choose, you should take care to get legal advice from a professional, such as a business attorney or a business formation service, so that you can be advised of the potential pitfalls and benefits for your specific situation.