Considerations for Setting Up Multiple Businesses under One LLC
You have multiple options to consider before jumping in. The route you choose can impact liability and tax obligations. I recommend talking with an accountant and attorney to get expert advice on legal and tax implications.
Different Approaches for Managing Multiple Businesses
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Use One LLC to Run Both Businesses
While suitable for inexperienced owners, experienced owners prefer separate LLCs to maintain separation and track items. Each entity operates independently. -
Operating Multiple LLCs
More paperwork comes with registering multiple LLCs. But if it makes sense, you shouldn’t let that stop you. Hiring an agent can eliminate pressure and ensure documentation is properly filed. For accounting, you’ll want a system for each LLC. -
Holding Company
Having businesses under one LLC protects assets and avails tax benefits. Choosing the right structure influences tax liability.
Comparison: Multiple LLCs versus DBAs
Is it better to have multiple LLCs or DBAs? Getting a DBA allows you to operate another business under a fictitious name other than the name of your LLC. For liability protection purposes, it is better to have multiple LLCs for each of your businesses.
Taxation and Cost Considerations
The taxation process for LLCs becomes complicated over time. You have to prepare for K-1s for all members. Members’ personal returns should be filed with K-1s.
In terms of cost, a DBA is more cost-efficient than registering multiple LLCs. To establish an LLC, you can expect to pay a higher registration fee and recurring renewal fees.
Key Points for Using a DBA
When Should a Business Use a DBA? DBAs allow business owners to operate under a different name without changing the company’s name legally. Additionally, many states require you register a DBA if you do business under a name other than your name or your official business name. A DBA is also a good solution if you already run a company and want to branch out of your current offerings.
Challenges of Multiple DBAs
However, you should always consider if multiple DBAs are the most strategic way to proceed as they can present challenges like higher overall risk, complicated tax filing, confusion for customers and vendors, and additional costs for each DBA filed.