How To Set Up and Structure Multiple Businesses

How to structure multiple businessesToday’s small business owners often earn income through a variety of ventures. For example, a restaurateur may open a wine shop or a caterer may also double as a part-time copy editor.

If you’re running multiple business projects, you’ve probably wondered what’s the best way to structure all these ventures. Should you form one corporation to cover them all? Should you form an LLC for each one?

You need to answer these questions from both a marketing and legal perspective. For marketing, you need to consider the markets and target customers for each venture. Are they synergistic? Are they relevant and will they appeal to the same customer?

If so, it makes sense to market them under a shared brand. For example, it may make sense for a restaurant and side wine shop to share the same branding.

In other cases, your businesses might target different customer types (for example, the copy editor and caterer). In this case, you want to use different websites, business names and branding for each venture.

But how do you structure multiple business ventures from a legal perspective?

How to Structure Multiple Businesses

There are three ways to legally structure multiple businesses. Each option has a different set of advantages and disadvantages – and the “right” approach depends on your unique needs. Here’s what to consider:

Option 1: Create a Separate Corporation or LLC for Each Venture

You can form an LLC or corporation for each business venture. For example, you can form an LLC for a bookkeeping business and then form another LLC for selling homemade soaps.

While this seems straightforward enough, be aware that this approach will result in considerable paperwork. You’ll need to file separate forms (i.e. annual reports, meeting minutes) to the state for each structure. And if you’ve formed corporations, you’ll need to file separate tax forms for each corporation. If you’re looking to minimize your administrative requirements, consider another option.

There’s one exception to this rule and that’s for real estate investors. If you’re investing in rental properties or other real estate, you may want to consider forming an LLC for each property in order to protect each investment on its own. Then if property “A” is sued, only the assets belonging to LLC “A” are affected. Your own personal assets are shielded, as well as the assets belonging to Property B, Property C, etc.

This is the best way to contain liability in potentially risky ventures.

Option 2: Create One Corporation/LLC and Have Multiple DBAs Under the Main Corp/LLC

Your second option is to create one main company as an LLC or corporation. Once that LLC or corporation has been established, it files multiple fictitious business names, also called DBA (doing business as) registrations, for each of the ventures within the same state/county.

With this approach, each business can have the right name and branding for their specific market, while still enjoying the legal protection of the main holding company. When it’s time to file your taxes, you can take the income earned from each DBA and report them in a single tax filing under the main LLC or corporation.

Of course, situations vary and you should always consult with an attorney or tax advisor for individual advice regarding your particular situation.

3. Create One Corporation/LLC with Other Corporations or LLCs Under the Main Holding Company

In the third approach, a holding company will own individual Corporations/LLCs for your multiple businesses. This scenario often comes into play for companies that are looking to be acquired. It also applies for those cases where an established company is looking to start a new business (and the established or holding company will fund the new business).

The particular tax and legal implications can become complex for this scenario. Consult with a tax advisor and/or attorney for the best way to structure your holding company and its subsidiaries.

Final Thought

Consider this overview of how to structure multiple businesses as just a starting point. And if you’re working hard to build your businesses, make sure you’re also doing everything you can to protect them.

Multiple Businesses Photo via Shutterstock

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Nellie Akalp


Nellie Akalp Nellie Akalp is CEO of CorpNet, her second incorporation filing service based on her strong passion to assist small business owners and entrepreneurs in starting their business. Free guides, advice and videos on small business legal topics are available at her Small Biz Corner.

17 Reactions

  1. Great tips. It’s important to know the proper process for setting up several businesses. You’ve laid out a clear and concise outline. Thanks for sharing with us.

    Ti

  2. Hi, thanks for this info. Would appreciate your take on this situation:
    I can’t decide between 2 unrelated businesses that I want to start (consulting business & specialty clothing line) so I’d like to just set up one DBA as a sole proprietor, get a EIN and then do both parallel for a limited time (maybe 1 yr). My goal is to pursue the one that shows the most promise & drop the other. So can I legally have one DBA doing different business activities or will that be against IRS rules?

  3. This information was spot on and well presented. It has provided me with the information I was seeking. Thanks.

    Continue your great work!!!

    Kind regards,
    Colin.

  4. I already have an LLC for my event planning company. I am looking to branch into other business ventures unrelated to event planning. I was reading the article “How To Set Up and Structure Multiple Businesses” and I believe that option 2 “Option 2: Create One Corporation/LLC and Have Multiple DBAs Under the Main Corp/LLC” might be best for me. However, does that mean I should create a new “parent company” and then make my existing company a DBA? Or should I change the name of my existing company to make it the “parent” and then make my existing and new company DBAs under that?

    • Nellie Akalp

      Hi Adyre –

      Thank you for reading my post and commenting! To answer your question, generally speaking, people in your line of work often create one corporation or LLC. They typically go the S Corporation route or the LLC route and then they have the Corp or LLC file a DBA doing business under different type of business they will be conducting.

      I hope that helps!
      -Nellie

  5. Thanks Nellie. But I am still a little confused. Currently I have an LLC, for sake of example we’ll call it “A LLC.” I am looking to venture into a totally unrelated business as well, we’ll call that “B” and I have created no company structure or official name for it yet as registered with the state. Do I create a separate LLC so that now I own A LLC and B LLC or do I change the name of my current LLC to, say “Adyre’s LLC” and then make A and B DBAs?

  6. Suzanne Livingstone

    Hello. you’re 2nd option makes much more sense to me now. I had been considering sole proprietorship but I am wanting to do 2-3 different “small” online companies and not combine them together, so that would make more sense

    With a LLC do you only need the one business license then and then like you said a DBA for each of the individual website/companies

    thanks

    • Nellie Akalp

      Hi Suzanne,

      Each individual LLC would have its own separate documentation (i.e. Business licenses, DBAs etc.) Depending on the nature of the business each separate DBA may need its own business license as well. I hope this helps. Please let me know if you have any other questions and I would love to assist!

      -Nellie

  7. I have two real estate properties and I am looking to establish a third. I would like to create a LLC or S-Corp with DBA’s. I notice that the S-Corp required much more paperwork however is less in taxes. How do you decide if the LLC or the S-Corp is a better choice?

  8. Thank you so much for this. I am currently brainstorming ideas for future businesses. I currently own one business and I just started an organizing blog. In the next year or so I want to open up my own professional organizing business. I also have other ideas for the next 5 to 10 years. This article is now bookmarked and I will use it as a reference.
    Thank you

    • Hi Becky –

      So glad my post could help you!! Best of luck on your ventures and if you have any questions, feel free to reach out anytime and I am happy to assist!! I’m always on Twitter and available to answer Qs! Twitter.com/CorpNetNellie :)

  9. Whats the best practice for setting up entities when multiple store fronts are going be involved (same line of business). An example would be like a massage envy or joint chiropractic franchise.

    Would each store front be a separate LLC along with an Operating LLC (with no ownership). That way if a given store front is having problems they can close that shop down without affecting others (having to break leases, etc)

    • Nellie Akalp

      Hi Dustin,

      The way you structure your business is up to you, however the example you gave is very common. We see a lot of business owners setting up a “parent” LLC and filing multiple entities underneath that LLC (making the parent LLC own all subsidiaries).

      I hope that helps!
      -Nellie

  10. In the 3rd scenario “3. Create One Corporation/LLC with Other Corporations or LLCs Under the Main Holding Company”
    Does the main holding corporation profit from the corporations or LLCs under it?
    Do you have any resources I could read about that topic?

    • Nellie Akalp

      Hi Ian –

      Thanks for reading my post and commenting! The answer to your question really depends on how you pay your taxes and how you structure the take in of fees. Unfortunately it is more of a tax question that should be asked to your CPA or tax advisor.

      Sorry I couldn’t be of more help!
      -Nellie

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