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You have amazing ideas for new businesses. You’re ready to incorporate in order to protect yourself and your personal assets, and you’ve decided it’s time to take the next step and create an LLC holding company for your various endeavors.
Then, the questions swirl:
By now, it’s common knowledge that Delaware is the gold standard when it comes to forming an LLC, LP, or Corporation. The Delaware LLC is by far the most popular entity type for most entrepreneurs building a startup.
As a result, people often wonder if they can operate multiple LLCs under one LLC holding company.
These are two completely different types of businesses, so it raises the question of whether or not the owner can provide both services under one LLC. Part of the consideration is, naturally, wanting to avoid additional costs for maintaining another LLC.
The answer is yes--it is possible and permissible to operate multiple businesses under one LLC. Many entrepreneurs who opt to do this use what is called a "Fictitious Name Statement" or a "DBA" (also known as a "Doing Business As") to operate an additional business under a different name.
However, just because it’s permissible and possible to operate several different types of businesses under one company (LLC or corporation) doesn't mean you should, as there can be downsides.
For example, if a lawsuit is filed against any one of the businesses, the assets of the others could be at stake. The result is that you put yourself at a higher degree of liability risk. In other words, if one of the pieces (businesses) within the LLC were to be held liable, then so could the entire LLC.
Instead, many people opt to file a new LLC for each of their start-up ventures. This isolates the risk by separating each business's debts and liabilities. There are, of course, additional maintenance fees, but these can be well worth it in order to protect your businesses.
Some people explore the low-cost series LLC when they want to operate several different businesses, which is very enticing since there is only one annual Franchise Tax payment to the state of Delaware and one annual Registered Agent Fee.
However, the structure of this business entity is relatively new and unproven, so there are often many hurdles that arise when dealing with a series LLC. It is generally considered safer and smarter for people to keep their business ventures completely separate from one another by forming 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.
As it stands today, the battle-tested, proven practice of creating individual LLCs that are formed for every variant of a business is traditionally still the most highly recommended strategy by tax professionals, attorneys and business consultants all over the world.
This means that for every sector of the business, for each product line, for every service provided, for each piece of real estate held, clients will often consider creating separate, traditional LLCs. Doing so ensures that the assets, debts, and liabilities of each LLC are completely disconnected and shielded from one another in the event of any possible litigation.
When establishing multiple LLCs, it can be extremely helpful to develop a blueprint hierarchy that will coincide with the relationship of the respective LLCs. For example, people typically set up numerous LLCs for real estate development.
This framework often consists of one parent LLC at the top of the hierarchy—let’s call it ABC Holding Company, LLC. People then typically create multiple sibling LLCs, one for each piece of actual real estate—let’s call them ABC Real Estate 1, LLC; ABC Real Estate 2, LLC; and ABC Real Estate 3, LLC.
Each LLC may own, manage and be responsible for a single piece of property; thus, while all the LLCs share the same holding company—ABC Holding Company, LLC—and may possess similar structures, ownership interests, assets and liabilities, they are insulated and shielded from one another in order to protect the properties and resources of each individual LLC.
This is also considered a smart, strategic way to further protect your personal assets from your LLCs.
If you would like more information or have any questions about forming your own companies, please contact us by phone (800-345-2677), Skype (DelawareInc), email or live chat. One of our knowledgeable business startup specialists will be happy to assist you.
*Disclaimer*: Harvard Business Services, Inc. is neither a law firm nor an accounting firm and, even in cases where the author is an attorney, or a tax professional, nothing in this article constitutes legal or tax advice. This article provides general commentary on, and analysis of, the subject addressed. We strongly advise that you consult an attorney or tax professional to receive legal or tax guidance tailored to your specific circumstances. Any action taken or not taken based on this article is at your own risk. If an article cites or provides a link to third-party sources or websites, Harvard Business Services, Inc. is not responsible for and makes no representations regarding such source’s content or accuracy. Opinions expressed in this article do not necessarily reflect those of Harvard Business Services, Inc.
There are 18 comments left for Can I Operate Multiple Businesses Under One LLC?Trae said: Thursday, February 18, 2021
This was super helpful. Thank you so much for this detail diagram of information. I want to have a vending machine and a business for wholesaling houses, would a DBA be good for those lines of businesses?HBS Staff replied: Friday, February 19, 2021
Thank you for reading our article and we're glad you found it helpful. We will reach out to you directly to help with your question.online casino Zahlt Nicht aus said: Saturday, January 23, 2021
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Thank you for reading our blog post and we are glad you found it informative.hil said: Thursday, September 24, 2020
Thank you so much. This answered the question I had.HBS Staff replied: Thursday, September 24, 2020
Our pleasure. Thanks for reading!Neil Donnelly said: Sunday, August 16, 2020
I have a PLLC with one health care location and want to add a new location. I want to use the existing business name but want to go into a partnership on just the new location. What legal structure would facilitate this?HBS Staff replied: Monday, August 17, 2020
Neil, we recommend you speak with a lawyer due to the various practical and regulatory considerations, but the you could also look into (1) using a DBA on the new entity representing the new location so that both operate under the same trade name (e.g., if the names are Healthcare CoolBusiness I, LLC and Healthcare CoolBusiness II, LLC, they could just jointly operate as Healthcare CoolBusiness as their trademark) or (2) the two locations could jointly own a third entity as a joint venture with gain and loss parsed out as appropriate from the centralized operating entity, which would operate under and hold rights to the desired name. However, these are just ideas and should not be taken as legal advice. Hope that helps!Uday Saindane said: Thursday, February 20, 2020
I want to start Snack & Chaat Center, Clothing , Shoe Laundry under One Premises with different name in Mumbai. Is it Ok to go ahead and do the necessary license for each and every business. Please advise. Mob - 9324949177HBS Staff replied: Thursday, February 20, 2020
We would be happy to help you set up multiple LLCs for your different lines of business if that is what you would like to do. Simply call, email, or live chat with us to get started. For business license support, we refer you to our partner LicenseLogix - https://www.licenselogix.com/.