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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?Andeywala said: Monday, July 24, 2017
Thanks for sharing up–to-date on this subject! I find it is very informative and very well written one! Keep up on this quality!HBS Staff replied: Monday, July 24, 2017
Thank you and we're glad you are enjoying our blog.Milana Beschastna said: Saturday, January 28, 2017
Hi we are want to open the company and looking for the best option. The types of business are yoga teaching, selling on amazon, and web design and programming. How better to combine all that? Thanks a lotHBS Staff replied: Monday, January 30, 2017
The types of companies you open and manage are entirely up to you. Best of luck.Dinah said: Tuesday, December 27, 2016
We have a commercial real estate LLC for more than 5 years. Do we need a separate LLC if we are selling products online like Amazon and eBay? Or can we put this as an umbrella? But still need a separate LLC name? We need to know quickly.HBS Staff replied: Thursday, December 29, 2016
The sky is the limit with how you choose to operate your LLC. However, typically, if you have two businesses that are doing two completely separate things then often clients file separate companies so not all their eggs are in one basket, so to speak (liability, legal issues, etc.).