December 21, 2014

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.

36 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?

    • moderator, will you answer?

      • Hi Emma and A’DJ –

        Sorry for the delay here. Great question. Generally it’s up to the business owner how they’d like to structure their business, however usually if the business will be doing two different things, they will be set up as separate entities. One very common way of doing this is setting up a parent company as a corporation or LLC, and then having multiple DBAs filed underneath. If you have any additional questions, my company specializes in business filings. Feel free to call our business consultant Katie Hendrix for a free business consultation at 888-449-2638 x110.

        -Nellie

  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?

    • 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?

    • Hi Adyre –

      Sorry for the delay. I just saw your comment. Great question. Both scenarios you outlined here are very common. It could be done either way – it just depends on how you as the owner would prefer to have your businesses structured. If you have any additional questions, my company specializes in business filings. Feel free to call our business consultant Katie Hendrix for a free business consultation at 888-449-2638 x110.

      -Nellie

  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

    • 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)

    • 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?

    • 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

  11. Hi,

    Nellie, I own a driving school and when I started my plan was to only service customers in the Brooklyn area and so I used my city name in the name of my school. What do you suggest if I wanted to market my services in other cities. My business is setup as an LLC. Do I need to create a new LLC or can I use my existing LLC and work under an assumed name.

    Regards,
    Tom

    • Hi Tom,

      Great question – what a lot of business owners often do in your situation is set up a DBA (or assumed name). If you have another business name you’d like to be able to use (as well as your current business name), filing a DBA will allow you to do so. Hope that helps!

      -Nellie

  12. Hi Nellie, I have been planning events and recently started making custom cakes. I would like to know how I would be able to do both legally from home under the same LLC. Do you think that choosing one over the other is a better idea?

    Thanks

    • Hi Amirah,

      Many business owners will set up an LLC, with a DBA (or Doing Business As) registered underneath so they are able to use 2 different names under the LLC. For example, a business owner could file an LLC for ABC Event Planning, and file a DBA underneath for ABC Cakes. This way, the name can be advertised either way. Hope that helps!

      -Nellie

  13. Can a 501(c)3 non profit D/b/a x corp sign a lease and then a same non profit sign a lease as a profit corp d/b/a as x corp

    • Hi Bill,

      Thank you for reading and commenting on my post. Unfortunately I cannot provide you with specific legal advice for your situation. I recommend contacting an attorney for your query.

      -Nellie

  14. Hi Nellie,
    I am the sole proprietor of 3 LLC’s, Event Planning/Venue, Wedding Planning, and Photography. I prefer to keep them as LLC’s and not change any to DBA’s. Customers know that the Wedding Planning and Photography are offered on the Event Planning/Venue and this year I setup only 1 checking account, under the Event Planning/Venue EIN, and have customers make payment to that name and all accounting is simplified by all being together and I have no personal desire to separate details. Thus, on my next Schedule C I plan to only have that one EIN. Does that seem good to you also?

    • Hi Roger –

      Thank you for reading and commenting on my post.

      Unfortunately I cannot provide specific legal/tax advice in response to your question. Sorry about that.

      -Nellie

  15. Nellie,
    Well done article as there is little of this information out there for ‘serial entrepreneurship under one managing roof’. In this consideration, when someone is developing a formation strategy, between a managing llc or s-corp with separate dba filings *or* a bona fide holding company (llc or s corp) that holds separate llc ‘ s (can a holding company file dba’s?), how is legal liability generally assigned. For example, does a managing llc assume all of the liabilities of the dbas, or does each dba have its own separate granted liability separate from the managing llc where the other’s within the group would remain unaffected.

    For the holding company example, I am assuming that each llc filed would retain their own liabilities. Is that the correct general idea (I’m exploring these for info before my legal appts.)? Let’s say the holding company wishes to share some technology or funding reallocation between subsidiaries as may be necessary. Do you know if that changes the terms of the formation or is that mainly just about proper documentation and filing.

    Can dba’s be converted to llc ‘s and vice versa as an occasion/need may warrant. I know that the lines get blurry here as adaptive business practices sometimes call for these sorts of changes, but just wanted to get your thoughts on these things that might be useful info for other readers (and to give me a bit more information before my legal and tax appts next month).

    Many thanks, and many kudos to your informative blog!

    • Hi Phillip –

      Thank you for reading and commenting on my post. I’m glad you found the information useful.

      Unfortunately DBAs cannot be converted to LLCs or vice versa. Generally, when a business owner is operating a DBA and wants to switch to an LLC, they will simply start a new LLC from scratch.

      I would suggest consulting an attorney to get information regarding your specific situation.
      Thanks
      -Nellie

  16. Hi Nellie,

    So much appreciated effort, i’m having 2 llc’s and a sole proprietorship under 3 separate dba”s how can i use them all under one holding company ? or is it better to have each one separate on it’s own?

    • Hi Sarah,

      Structuring your business can be a confusing process – many people will file a corporation or LLC and file several DBAs underneath that entity. The way this is done is when filing the DBAs, the LLC will be listed as the owner. This way, the business will be able to do business using the LLC name or any of the DBA names. If you need any assistance or have any additional questions, my company CorpNet can help – please call our office for a free business consultation: 888-449-2638, ask directly for Katie Hendrix at x110.

      -Nellie

  17. Ok. One other question. If you go with route 2, would you need separate EIN numbers for each dba?

    • Hi Eric,

      DBAs are not required to hold EIN numbers – it’s optional, as the owner can also use their personal Social Security Number. DBAs that are filed under a corporation or an LLC typically do not obtain EINs, because they fall under another entity with its own EIN.

      -Nellie

  18. I manager an INC business. We are considering adding a 2nd location in the same City, but under a different township. Would the new location need to be set up as a separate business, or is there a way to have them under the same business just with two different locations? We want to be able to move staff between locations, and plan to have the same clientele database at each, and only have one set of “books”

    • Hi Tracy,

      I would recommend speaking with an attorney regarding this matter as it appears you need some legal advice. Generally, as long as the business is being conducted within the same state, usually there are no additional steps that need to take place. However, every state and every circumstance are different, so I would recommend getting some legal advice. If you do not currently have a business attorney, my company CorpNet.com offers an affordable legal plan that could work for you. However, right now we offer it in select states. Please take a look and if we offer it in the state you are in, feel free to touch base :) http://bit.ly/TB9bbj

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