Limited Liability Companies (LLCs) come in all shapes and sizes, including multi-national companies like Chrysler, Cargill and Toyota. It’s easy to put up an LLC, protect your business against personal liability, and have a flexible tax payment structure.
You can make multiple LLCs without any legal limitation. However, be prepared for some serious paperwork. Many successful businesses form multiple LLCs, but what are the benefits?
Pros of Having Multiple LLCsLimited Liability
This is probably the biggest strength of limited liability companies. If you have several companies, and one tanks, the rest will remain unaffected. You can close one company without risk to your other companies. With multiple LLCs, you’re shielded against the following forms of liability:
Damages: when someone is hurt on your property or by your businessVendor disputes: when you are billed more than you oweUnpaid business debts
C-Corps and S-Corps protection is similar to LLC liability. These businesses contrast with sole proprietors who have unlimited personal liability, meaning that they must pay for debts if their companies lose money. In LLCs, the owner can only pay for losses if he/she provides additional personal guarantees.
Easy to Create and Run
LLCs are easy to administer. In most states, you’re only required to fill out an online form, which takes a few minutes. You then pay with a credit card and all is set. It’s advisable to seek legal counsel and assistance to ensure you’ve completed all the necessary steps.
You can then visit the IRS website and file to get your business an Employer Identification Number (EIN). Afterward, you’ll need to open a business checking account. Doing this helps separate personal from business expenses.
You Can Easily Change the Tax Structure
LLC owners can decide how they want to pay taxes. The majority prefers the pass-through method. Approximately 95% of all businesses in the U.S. are pass-through entities. This means that the tax liability of members is included in the personal tax return.
LLCs are generally cheaper than corporations, among other alternatives. Taxes on C-Corps are higher than LLCs. C-Corps are taxed twice on profits. For an LLC, you only need to make a payment for self-employment tax.
No Limits to the Number of Partners or Member
You can start an LLC with any number of partners. Many LCCs can own a Single-member LLC in the form of a multi-layered company. Most industries, including pharmaceutical, real estate and branded retail products, use this strategy. You can start an LLC with as few or as many members as you want. It’s different from limited liability partnerships, which are restricted to a maximum of 100 owners.
Cons of Having Multiple LLCs
Additional Tax Forms
The taxation process for LLCs becomes complicated with time. You have to prepare for K-1s for all members. Members’ personal returns should be filed with K-1s. Typically, LLC tax forms include excise taxes, if applicable, K-1s and company tax filing.
Large Capital Base
Outside investors find this type of business risky due to flexibility and the pass-through nature. As a result, many entrepreneurs prefer investing in C-Corps. LLCs also don’t issue shares. This makes it quite challenging to raise capital.
Filing Fees
The fee for filing a new LLC ranges from $50 to $500 depending on state laws. This payment does not include the annual filing fee that ranges from $0 to $820. Such expenses increase the financial burden.
It is essential to consult with an accountant or business lawyer if you are in any confusing multi-business situation. Analyze the benefits and setbacks to determine the best move for your business. Contact the experts at Fair, Anderson & Langerman at 702-870-799 to discuss your company’s options today.
FAQs
It's not actually unusual to have multiple LLCs, either as a sole owner or as one of a group of owners, or "members," as they are called in an LLC. Owning more than one LLC may make sense if: Separate businesses. If you have two separate businesses, two LLCs can minimize your risk if one business fails.
Can you have multiple LLCs under one EIN? ›
You cannot use the same EIN for multiple businesses, even if they are owned by the same person. EINs are not limited, so you may apply for as many as you need. You are dividing your business into separate entities.
How do you structure multiple LLCs? ›
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.
What are the benefits of an LLC owning another LLC? ›
The most attractive element of owning multiple LLCs under one holding company is the separate limited liability it offers. As each LLC is a separate legal entity, if one should tank, your parent LLC is safe from any fallout, such as lawsuits and debts.
Why would someone own multiple LLCs? ›
You can own as many LLCs as you want, but you'll have to pay to form and maintain each one. Many entrepreneurs choose to own several LLCs to grow their brands because of the layered liability protection and new business tax incentives. If you're not sure where to start, keep reading.
Is it smart to have multiple LLCs? ›
As the old adage says, "Do not put all your eggs in one basket." Instead, many people opt to file a new LLC for each of their start-up ventures. Owning multiple businesses under separate LLCs isolates the risk by separating each business's debts and liabilities.
What is an umbrella LLC? ›
An umbrella LLC is another word for a holding company. An umbrella LLC owns other LLCs that are below it, known as subsidiaries. It effectively shelters those LLCs from cross liability in the event that future litigation results in a judgment creditor trying to collect against assets of a company.
Do I need separate EIN for each LLC? ›
If business owners have set up various businesses as independent legal entities (e.g., separate LLCs, C Corporations, S Corporations, or any combination of these), they will need to obtain an EIN from the IRS for each entity. Each business entity must have a distinctive EIN.
How many LLCs can one person have? ›
The short answer is there are no particular limits on how many LLCs someone may form, provided they meet all of the eligibility criteria to be an LLC member and comply with all of the federal, state, and local government rules and regulations for operating an LLC.
What do you call an entrepreneur with multiple businesses? ›
Serial entrepreneurs are people who have founded multiple businesses consecutively. These individuals usually have a track record of setting up successful enterprises.
Disadvantages of creating an LLC
Cost: An LLC usually costs more to form and maintain than a sole proprietorship or general partnership. States charge an initial formation fee. Many states also impose ongoing fees, such as annual report and/or franchise tax fees.
Can one LLC pay another LLC? ›
One LLC can fund another LLC either via an equity investment or a loan.
What are three things that LLCs are not required to do? ›
LLCs also provide a lot of freedom in management as there is no requirement to have a board of directors, annual meetings, or maintain strict record books.
What are 5 disadvantages of LLC? ›
Disadvantages of an LLC
- Liability limited by business assets.
- The ability of the business to remain in existence if a shareholder departments.
- The creation of a centralized management structure.
- Flexible asset transfer.
Tax deductions
The IRS allows LLCs to deduct initial start-up costs — e.g., marketing materials, travel, permits, legal fees, research — and thereafter allows deductions for a wide variety of operational costs, including: Computers, printers, and other office supplies. Phone and internet.
Can I file my taxes with 2 different companies? ›
Filing taxes for a business you own may require you to report your business income on your individual income tax return. If you own multiple businesses, you may need to file separate returns for each, depending on their legal business structure.
How do I file taxes if I have two businesses? ›
If you have two single-member LLCs, you will file taxes like a sole proprietorship, using a separate Schedule C for each business. If you have two multi-member LLCs, you will file like a partnership, with a Form 1065 for each company, plus a Schedule K-1 for each company reported on your individual income tax return.
