Do you think owning and running one business is tasking? That is because you have not tried owning multiple businesses.
Daily, we must have met several entrepreneurs and most of them would have been more than mere acquaintances. What you must have noticed is how curious, driven, and insatiable they can be with the status quo. These qualities are perhaps why a lot of them delve into multiple businesses. That restaurateur is likely to own a wine shop very soon; that personal trainer you know may soon be running a line of fitness apparel. The reality is that there is a fresh opening at their disposal somewhere anyways. Besides, having varying sources of income can be an excellent strategy.
Therefore, if you own multiple small businesses or you are looking to launch a second one. You will need an answer to what approach is the best to legally structure each of the businesses. You want to know if you should maintain distinct corporations/LLCs for each business or if an overall company structure can hold them all in. Is there any maximum to the number of businesses one person can own?
These and more are the questions you would be faced with in your new endeavor. We have created this article to provide you with answers to all these in the form of tips and strategies. Dive in!
Owning and Structuring Multiple Small Businesses
In general, there are three distinct approaches to structuring multiple small businesses. There are bones and banes for each of these approaches. Eventually, you will have to consider your particular situation to known which of these structures will suit you the most.
Take this as a general tip from us while you are at it. You have the liberty and opportunity to always talk about your particular necessities and details with an attorney or a CPA.
1. Establish Distinct Corporations/LLCs.
For starters, there’s no maximum to the number of corporations or LLCs an individual can establish. Several entrepreneurs prefer to file a distinct, fresh LLC or corporation for each of their new businesses. For instance, you can establish an LLC for your landscaping company and a new LLC for the golf course you acquired.
The major merit of this approach is that it singles out the risk to each business separately. So in a case where your client charges your landscaping business to court, your golf course business will not be affected at all. Furthermore, if your golf course is not booming business-wise, your landscaping business won’t have to bear this liability with the golf course.
The primary con of this approach is that it requires extra maintenance charges and paperwork. For instance, you’ll be required to pay to embody/establish an LLC for each business, as well as other maintenance charges you will pay to the state every year. You’ll likewise have to obtain different licenses and EINs for each of the businesses. You will again have to file tax forms for each of the distinct corporations.
For some entrepreneurs, all this different paperwork can be distressing. But for others, the extra charges are well worth it as long as it safeguards each business from whatever befalls the others. A special example is real estate investors. They prefer to establish an LLC for every one of their properties. This is in a bid to protect each investment. Hence, if “Property X” is sued, there will be no effect on any of the possessions belonging to “Property Y” or “Property Z.”
2. Set DBAs As Parts Of A Singular Corporation/LLC.
This approach is another popular alternative. Here you will file one LLC or corporation, and then establish many DBAs (Doing Business As) for the rest of the businesses. In line with the aforementioned instance, you may possess an LLC for “Griffin’s Landscaping Services.” Then, if you launch a golfing enterprise, the LLC can file a DBA for “Griffin’s Golf Course.” Speaking of this from the marketing view, you can manage each business as if they are different businesses.
With this strategy, each business outfit can employ the most suitable branding and company name, while you streamline some of the yearly maintenance. All you have to pay for will be your yearly LLC/corporation maintenance surcharges for the LLC/corporation (not for the separate DBAs). In a case where you need and/or use an EIN, one EIN will do. And the moment the time comes to pay your taxes, you can pick out the earnings made from each DBA and file them in just one tax filing under the umbrella LLC or corporation.
Each business outfit (DBA) is a beneficiary of the legal preservation provided by the umbrella LLC/Corporation. For instance, if there should be any mishap to any of your DBAs, your private possessions will be protected (that’s if you set the DBA under your LLC/Corporation). But each DBA isn’t shielded from the other DBAs. Therefore, when one DBA is sued, every other DBAs under the umbrella LLC/corporation are a part.
3. Develop A Business Under The Holding Corporation.
For this third approach, you can develop unique corporations/LLCs for each of your new businesses and place them under a primary holding corporation/LLC.
This case is familiar in a few circumstances. First, for corporations that are hoping to be procured or could spin off any of their businesses. Again, for established businesses that want to launch a new business (where the established business will finance the new business). As you would expect, this design can come with complicated tax and legal significance. We will advise that you discuss with a tax consultant or an attorney on the most suitable means to structure a holding company and businesses under it.
Closing Thoughts
To sum it up, legally, you are not limited as regards the number of business enterprises you can own and manage. Be sure to pay close attention to providing an adequate account for your liability risks as an owner of these businesses.
Having explained all you need to know about the structural and legal dimension of owning multiple small businesses, it is important for you to also manage these businesses properly.
