Organizing Multiple LLCs
Consider these three organizational methods:
- Single business entity with multiple DBAs (Doing Business As).
- Form separate LLCs for each business unit.
- Create a holding company with LLCs beneath it.
Strategic Business Focus
A single business focus helps maintain clarity. When considering multiple LLCs, ask yourself if you need separate accounting and operations. If that’s the case, separate LLCs might be the better choice.
Planning for the Future
Thinking ahead is crucial. Having multiple LLCs can streamline future business deals, but it also increases tax filing responsibilities, with each LLC needing to file annual returns, leading to additional accounting fees and management tasks.
Starting with DBAs
Entrepreneurs might begin with DBAs, which allow testing new brands without the formation of new companies. However, DBAs do not offer the asset protection that separate LLCs provide, as risks are shared across all DBAs under a single entity.
The Holding Company Structure
Establishing a parent LLC that holds other LLCs can provide structure. However, issues at the parent level can affect the subsidiaries, so caution is advised when relying on this method for claim protection.
Business Evolution and Complexity
Begin with a simple organizational design and adapt as the business grows. Early complexity can be a pitfall, but staying flexible with your strategies is advantageous in the long run.