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Written By:
Denise Elizabeth P
Yes, you can have multiple businesses under one LLC, but there are other options to consider depending on your business scenario.
Whether you are expanding your business, restructuring, or perhaps taking on an entirely different segment or focus area, there are different ways to structure your LLC.
The type of structure you choose will determine your tax liability, so it is good to know what the options are and weigh the pros and cons.
Ways to structure multiple LLCs
Here are a few common ways that business owners structure their LLCs to take on other businesses, segments, or focus areas:
Run both businesses under one LLC using a DBA
Say you already have an LLC but you want to branch out to another service or focus area under the same niche.
Rather than creating an entirely new LLC, you can set up a DBA (doing business as) or multiple DBA’s.
Say you have a pet grooming business called “Joyful Pet Grooming, LLC” but you want to start selling pet supplies online.
Rather than creating a separate LLC for the online pet supply shop, you can just file a DBA for “Joyful Pet Supplies.”
What is great about this scenario is that both businesses can be run separately, meaning that you can accept payment made out to their specific names and you can maintain separate accounting books.
When tax time rolls around, you only have to file one tax return for both businesses because the DBA falls under the LLC “Joyful Pet Grooming, LLC.”
This makes filing taxes easy and straightforward.
The owner of the business still receives the pass through taxation benefits of the LLC (from both businesses because they file one return under the main LLC) and the benefits of liability protection.
This all sounds great but there is one downside to this scenario: because both businesses are under the same LLC, they are considered one business entity.
Therefore, let’s say your online pet supply store doesn’t do as well as planned and you cannot pay off the supply inventory that you are indebted, the financial distress of the online pet supply store effects the grooming business as well.
As the owner, your personal assets will be protected but both your grooming and your online pet store are equally effected should one of the businesses be sued or run into financial troubles.
The only way to avoid this from happening is to create two separate LLCs for each business.
You can learn more about DBA’s here.
Create separate LLCs for each business
Many business owners choose this option because of the extra layer of liability protection that it offers.
Let’s use the same example as above.
Say that the business owner of “Joyful Pet Grooming, LLC” opens a second LLC for their online pet store and calls it “Joyful Pet Supplies, LLC.”
A client of Joyful Pet Grooming, LLCs dog gets injured while being groomed and files a lawsuit against the LLC and wins, forcing the grooming business to be closed down.
In this scenario, both the owner of the LLCs and Joyful Pet Supplies LLC are protected from the bankruptcy filing of the pet grooming business because they are separate entities.
Creating separate LLCs for each business isolates the risk should there be any legal or financial issues.
This is why creating multiple LLCs is such a popular option.
The only downside is that creating multiple LLCs requires more paperwork, is more expensive, and you have to file separate tax returns for each LLC.
Furthermore each LLC must obtain its own EIN as well as its own business licenses and permits.
They need to be treated as completely separate entities with their own bank accounts and records.
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Create a Holding Company with separate LLCs under it
The third common way to structure multiple businesses is to create an LLC holding company and then have each individual LLC under one parent LLC.
To stick with the same example, in this scenario the business owner would create an LLC holding company called “Joyful Enterprises, LLC”.
Joyful Enterprises, LLC is the holding company which owns “Joyful Pet Grooming, LLC” and Joyful Pet Supplies, LLC.”
This is a great option if the business owner might want to possibly sell off one of the business lines later down the road.
Structuring multiple businesses this way also offers protection for the individual LLCs against the lawsuits and debts of the other LLCs and liability protection for parent LLC owners.
This scenario is a little more complex and has more tax and legal implications if not done correctly.
Conclusion
As you can see, you have a few different options when it comes to having multiple LLCs.
Each has its own pros and cons so before deciding on how you want to structure your different business ventures, we always recommend speaking to a tax professional or attorney.
