Have Multiple Businesses Under One LLC
When it comes to businesses, not even the sky is the limit—you can have as many business entities as you want. But if you have several businesses going, it can be difficult to manage all of them effectively. One way to simplify your businesses is by organizing them all under one LLC. Done right, this can simplify your legal and financial paperwork so you can focus on actually running your businesses—but the set-up process can get a little tricky. Here, we've compiled answers to some of your most common questions about operating multiple businesses under one LLC roof.
- 1 Steps
- 1.1 Can you operate multiple businesses under one LLC?
- 1.2 What if I want my other businesses to have different names?
- 1.3 Do I have to set up DBAs for different businesses?
- 1.4 How do I set up a DBA?
- 1.5 Are there any dangers to having one LLC with multiple DBAs?
- 1.6 How are multiple LLCs different from multiple DBAs?
- 1.7 Can one LLC own other LLCs?
- 1.8 Does each LLC need its own tax number?
- 1.9 How do I know if a holding company structure is right for me?
- 1.10 What are the advantages of a holding company?
- 1.11 What are the risks of a holding company?
- 2 Tips
- 3 Warnings
- 4 References
Can you operate multiple businesses under one LLC?
- Yes, you can operate as many businesses as you want under one LLC. Since an LLC can serve any business purpose, that means it can also serve every business service you want it to. Even if you have many different businesses, you can technically run them under the same LLC. This makes LLCs particularly versatile for freelancers, contractors, and other entrepreneurs who may have several things going at once.
- For example, suppose you started an LLC for your freelance web design services. If you later decided you also wanted to start a graphic design business creating logos, you could run that under the same LLC. Want to expand even further and offer social media support or brand management? You could also run these under the same LLC.
- As long as you have a single-member LLC (in other words, you don't have any partners), you can expand indefinitely. If you have other partners, though, you'd typically have to get their approval. It depends on the structure you've laid out in your Draft an Operating Agreement.
What if I want my other businesses to have different names?
- Create DBAs to use different business names. If you're running multiple businesses out of a single LLC, registering a DBA with your state allows your LLC to operate under different names. The DBA is an official acknowledgment that your LLC is "doing business as" something else.
- For example, suppose you created an LLC called "Carolina Graphics, LLC" for your graphic design business. If you decided you also wanted to branch out into web design, you might decide to register "Carolina Web Design" as a DBA. The full, official title would be "Carolina Graphics, LLC, d/b/a Carolina Web Design."
- Your DBA name wouldn't have "LLC" after it, because you haven't formed a separate LLC in that name.
Do I have to set up DBAs for different businesses?
- No, but separate DBAs can make marketing and promotion easier. With separate DBAs, you can create specific names to distinguish each business in the minds of the general public. You can also open separate bank accounts to keep the money for each business separate.
- For example, suppose you formed an LLC called "Sunshine Services, LLC" for bookkeeping services. If you decided you also wanted to offer tax preparation services, you could register "Sunshine Tax Prep" as a DBA. That would allow you to reach tax prep customers separately.
- If you're using a name for your business that's different from the name of your LLC, you do have to register that DBA with the state where the business is located—even if you haven't set up a separate bank account.
How do I set up a DBA?
- File a registration form with your state's secretary of state. Each state has its own process for registering a DBA, typically handled by the secretary of state's office. The form simply requires you to list the name you're using and the date you started using it, as well as basic information about yourself and your business. You have to pay a fee to register your DBA. Although the amount of the fee varies depending on where your business is located, it's usually less than $50.
- Before you file your DBA form, check your state's business name database and make sure the name you want isn't already in use. You can usually access the database through the website of your state's secretary of state.
- If you're setting up the DBA within your LLC, list your LLC on the registration form as the entity using the name. You might also need to provide a copy of your LLC's organization documents.
Are there any dangers to having one LLC with multiple DBAs?
- Multiple DBAs come with a greater liability risk. Your LLC is liable for all of the debts and legal issues that arise within it, regardless of how many DBAs you have. The more businesses you have running under a single DBA, the more risk that LLC is potentially assuming. However, this all depends on the types of risk that face each business.
- For example, suppose you have an LLC to run a restaurant and then add a DBA under that LLC to manage a rental property. If a tenant sues over problems at the rental property, they could potentially come after the restaurant as well.
- On the other hand, if you're running a web design business and add on graphic design and social media support, you might not be expanding your risk that much because all of those businesses are in the same sector.
How are multiple LLCs different from multiple DBAs?
- Multiple LLCs don't share risks as DBAs do. If you run all of your businesses as completely separate LLCs, all of them are considered distinct entities. This means that if one of them has a problem, none of the other LLCs can be forced to cover that problem. With DBAs, on the other hand, all of your businesses are considered one and the same.
- Think of a DBA as a sort of nickname. No matter how many nicknames your LLC has, it's still the same LLC and it's still responsible for everything.
- In contrast, if you make every business a separate LLC, each one is insulated from the others' risks. As an extreme example, if one of your LLCs went bankrupt, its creditors wouldn't be able to come after the assets of the other LLCs because they're separate entities.
Can one LLC own other LLCs?
- Yes, the main LLC acts as a holding company for the other LLCs. When you fill out the paperwork to form your LLC, you would list your main LLC as the sole member of the new LLC. This makes the main LLC the parent, or holding company, and the new LLC the subsidiary. Technically, you can have as many subsidiary LLCs as you want.
- With this structure, your main LLC typically doesn't do any "business" of its own, apart from managing and organizing the other LLCs. This is why it's known as a holding company—it merely holds the others. You might also hear it called an "umbrella company," because all of the other businesses exist under the "umbrella" of the main LLC.
- An LLC can also be a partner in another LLC, although this gets a little more complicated. For example, if you and your brother wanted to open a restaurant and you already owned a restaurant through an LLC, you might make that LLC a partner with your brother in the other LLC that operates the new restaurant.
Does each LLC need its own tax number?
- Maybe, depending on the tax classification you choose. LLCs are created under state law, so you can choose whether you want to have your LLC treated as a corporation for federal tax purposes. If you choose to treat your LLC as a "disregarded entity," meaning that it isn't treated as an entity separate from its owner, it might not need an Get an Employer Identification Number for federal tax purposes. However, your state might require one or you might want to get one for financial purposes.
- You'll still need an EIN if your LLC has employees, even if it is treated as a disregarded entity for tax purposes.
- Any of your LLCs that you elect to have treated as a corporation for tax purposes must have their own EIN.
How do I know if a holding company structure is right for me?
- A holding company structure is best if you're trying to spin off of your original business. If all of your businesses are in roughly the same sector but you want to keep them separate, you might consider using one LLC as a holding company with multiple LLCs under it. That way, each LLC remains separate from the others, but they're all run by the same entity.
- Real estate developers frequently use this model, creating an LLC for each property. That way, each property is shielded from responsibility for the debts or liabilities of any of the other properties.
- Talk to an accountant or attorney who specializes in business formation about your plans. They can look over your situation and advise you on what structure would best suit your needs and the needs of your businesses.
What are the advantages of a holding company?
- A holding company gives you flexibility and centralizes control. If you're trying out different business ideas, having them all owned by a single LLC allows you to quickly disband the ones that aren't working. It also keeps all of your separate businesses insulated from liability if one of the businesses happens to fail.
- If each of your subsidiary LLCs is passing money to the holding company, that also allows you to more easily transfer money between your businesses if one of them runs into temporary cash flow problems.
What are the risks of a holding company?
- A holding company comes with complex tax and legal issues. If you have your subsidiary businesses also organized as LLCs, they'll be considered separate entities from the holding company. In practice, this means that you'll have to file separate formation documents, get separate licenses, and potentially file separate taxes.
- Ultimately, this isn't that much different from having several separate LLCs that simply operate independently of one another. You still have the same tax and legal requirements to keep up with.
- If your subsidiary LLCs are structured differently or there are other partners involved, you can run into pretty significant tax and legal complications.
- Check registration requirements for every state and county where you operate your business. If you operate in multiple states, it's a good idea to hire a business attorney to make sure you're registered everywhere you need to be.
- If you're not sure what structure would work for your businesses, talk to an accountant. They can run through the financial and tax implications of different structures so you can choose the one that best suits your needs.
- This article applies to LLCs in the US only. If your LLC is organized in a different country, different regulations might apply. Consult an attorney who specializes in business organization.