There may come a time when you decide to expand your business into an additional area of focus or take an online business to a storefront (or vice versa). These shifting operations lead business owners to wonder if they can have multiple businesses under one LLC. The short answer is, yes, you can operate multiple businesses under one LLC.
However, before you jump in, you have multiple options to consider. The route you choose can impact you in several ways (including your liability and tax obligations), so it’s critical to do your homework and weigh the pros and cons. I recommend talking with an accountant and attorney about your situation so that you get expert advice and direction on the legal and tax implications.
What Options Do You Have for Owning and Operating Multiple Businesses?
Let’s take a look at three popular ways to structure multiple businesses and explore how each scenario works.
1. Use One LLC to Run Both Businesses
One common approach involves having one LLC (usually named for the original or primary business) and then setting up a DBA (short for Doing Business As) or multiple DBAs for the new venture(s).
That was a mouth full, so let’s look ata hypothetical example:
- Jonah has an LLC for his auto repair shop, called Jonah’s Vehicle Repair and Restoration, LLC.
- He now wants to branch out and sell antique car parts online.
- He might opt to keep both business lines under his existing LLC but differentiate the new venture by filing the DBA for Back in Time Antique Car Parts and Accessories.
In this scenario, the businesses can be run as though they are separate companies with many advantages:
- Both companies have the ability to accept checks made out to their specific name.
- The business owner enjoys simplified business compliance requirements because there’s only one business entity (and one EIN) to maintain.
- Tax time remains relatively straightforward. The business owner reports income from the LLC and any DBAs that are part of it through a single tax filing under the main LLC.
- The business owner has personal liability protection for both the original LLC and any DBAs filed for it.
Using our hypothetical friend Jonah as an example, Jonah’s personal assets will be shielded (under most circ*mstances) if either his LLC or DBA business is sued or cannot pay its business debts. Note, however, that the LLC and DBA are considered one entity. Therefore, both business lines’ assets are at risk if one or the other runs into legal or financial distress.
2. Create Independent LLCs for Each Business
Many business owners choose to form a new LLC for each of their business ventures. In most states, there are no restrictions on how many LLCs an entrepreneur may create. For example, our friend Jonah may decide to form an independent LLC for his online antique car parts business while running his vehicle repair shop LLC separately.
In this scenario, we have a mix of advantages and disadvantages:
- Independent LLCs isolate the risk for each individual business. So, if someone sues Jonah’s Auto Repair LLC, his online antique car parts LLC’s assets will be protected, and vice versa.
- It comes with additional compliance fees and paperwork. Creating separate LLCs requires filing Articles of Organization for each company, maintaining separate operating agreements, and filing whatever ongoing reports and fees are required for each LLC.
- Each LLC must also obtain its own EIN.
- Each LLC must apply for and maintain its own business licenses and permits.
- Each LLC must maintain its own records and bank accounts.
3. Create an LLC Holding Company With Individual LLCs Under It
Another option for running multiple businesses is to create individual LLCs for each of the businesses and then put them under one parent LLC that acts as a holding company. Typically, a holding LLC will have administrative significance, but no direct operations tied to it. Rather, it will own the assets required to operate the LLCs beneath it.
Using Jonah as our example again, in a holding company with an LLC structure, he might form Jonah Enterprises, LLC as a parent LLC, which then owns Jonah’s Vehicle Repair and Restoration, LLC and Back in Time Antique Car Parts and Accessories, LLC.
In this scenario, we have some advantages:
- This scenario may be attractive when a business owner is looking to sell a business line or spin off one of their businesses.
- It may also be beneficial for an established company that wants to fund starting a new business.
- Structuring multiple businesses this way offers protection for the individual LLCs against the lawsuits and debts of the other LLCs and liability protection for parent LLC owners.
In this scenario, we also have some disadvantages:
- The tax and legal impacts of this option can get a little complex, so it’s advisable to consult with a tax advisor or attorney when structuring businesses as a parent company and subsidiaries.
- Creating and running multiple LLCs involves filing Articles of Organization for each company and having separate LLC operating agreements.
- Each LLC must maintain its own records, bank account, payroll, and tax documents.
