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. 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.
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.
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 23 comments left for Can I Operate Multiple Businesses Under One LLC?Jeremiah said: Monday, May 9, 2022
Hi. I found your website to be very informative. My question is that Ive started a llc incorporated that is in the process of becoming a non-profit corporation. A good friend wants to start a for-profit business completely unrelated to my original llc, but asked me to set-up the for-profit under my new llc. Should I do the original as a parent llc Inc with subsidiaries, or should i do individual llc's? There's no danger of litigation as they are spirituality based businesses.HBS Staff replied: Tuesday, May 10, 2022
Thank you for your question and for reading our blog. We are happy to assist you. Generally, clients will form separate entities for each business venture that way not all their eggs are in one basket. With that being said if you wanted to make the current entity be the owner of the new entity that is possible. We will reach out to help with any additional questions.Julia irvine said: Tuesday, April 12, 2022
I ‘ve owned an Adult Day Social Center for twenty years and see the need for us to offer Home-care for our families when their loved one is at home. Should I establish it a a sister company or a division of or establish a whole separate LLC I’d appreciate any advice you could give me Thank you Julia irvine Jirvine999@yahoo.comHBS Staff replied: Wednesday, April 13, 2022
Hello Julia, Thank you for your question. Generally, you will start a separate LLC for each individual business that way not all your eggs are in one basket. We will be happy to reach out to help further assist you with all your questions.Alnoor said: Friday, April 8, 2022
Great info! I understood that I can have multiple business ideas under 1 LLC but keeping them shielded from each other makes sense. I started a venture consulting firm few years back but wanted to use the same business structure for my eBay store that is just selling a few things here and there that I own. Can I just use a dba for that?HBS Staff replied: Friday, April 8, 2022
Thank you for reading our blog and your question. You can file DBAs for your LLC, this is typically done in the local County in which your business physically operates, but often if you have separate businesses you will often form separate entities that way all your eggs are not in one basket. We will be happy to reach out to you via email to answer any additional questions.Eden Walker said: Wednesday, April 21, 2021
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Thank you for comment and thank you for reading our blog. We will have a Sales rep reach out to you to better assist with your question.Sinenhlanhla said: Sunday, March 7, 2021
Thank you so much for this article, it was really helpfulHBS Staff replied: Sunday, March 7, 2021
Sinenhlanhla, Thank you for reading our article and glad you found the article to be helpful.