Operating Multiple Businesses Under One LLC

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:

• What type of business activity can I conduct with my LLC?
• How many different businesses can I operate under one LLC?
• Should I set up DBAs?
• Should I create a separate LLC for each project?
• Will a series LLC work for me, or should I stick to multiple, traditional LLCs?

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. 

Structuring Multiple Businesses Under One "Umbrella" LLC

For example, let's pretend a business owner has a trucking business incorporated as an LLC but after some time, he/she may also want to offer real estate services.

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. As the old adage says, "Do not put all your eggs in one basket."

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. Think of the separate entities as helpting to put up a big brick wall inbetween each LLC.There are, of course, additional maintenance fees, but these can be well worth it in order to protect your businesses and offer the peace of mind that separate LLCs will afford.

What About a Series LLC?

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. Many service providers, banks, attorneys, accountants and other businesses are still unfamiiar with the series concept. It often takes time to explain the series concept and to obtain approval for documentation required, for exampke, from a bank's lending group. 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. 

Separate LLCs for Separate Businesses

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.

Next: How to Create and Use a DBA