Running singular LLCs for smaller business is well enough to occupy the business owner’s time, however, different reasons and business growth can cause shifts in your company. Luckily, small business owners have the option of expanding to multiple LLCs -it could even be a way for you to branch out!
There is no harm in starting another LLC; it may just be the option you needed to explore a new avenue in your business venture! It’s a good way to try out your ideas withoutt risking any aspect of your already established business.
Three main strategies are are applied in starting more than a single business. Let’s review those methods and evaluate the advantagges and disadvantages together below.
At some point in your life as a business owner, you’ll catc yourself asking the question ‘Can I own more than one LLC?’ Your answer is Yes! Business owners are allowed to form multiple LLCs, as long as the city/state and country rules and reulations of business running and management are followed.
Although, factors that suit one LLC may not fare well with the other. One method of owning multiple LLCs is by branching out with DBAs (Doing Business As) in place of creating different LLCs. This can be done if the products or services of one business deviate ffrom the original catering features of the business.
Let’s review an example to understand this better. Assume you own a company selling handcrafted statement candles, but now you would also like to sell small hand-painted décor pieces. By registering your business under a fictious name under the original LLC you formed. Maybe in the near future you’d like to sell some jewelry as well. You can register that under another fictious business name and operate your business. Both of your new business will operate under a DBA, rather than the name of your candle company.
In doing so, the advantage you avail is having all tree enterprises protected by the LLC liability protection. However, this also means that if one enterprise of yours gets sued, the remaining ones will also be implicated in covering debts etc. Apart from this, a common occurrence is the unavailability of a fictious name. Some other company might have already chosen the name you wanted for your business and therefore will have to pick a name that has not been already taken. You’ll feel lighter knowing that you can file taxes for your DBA and LLC under the same EIN (employer identification number).
As we’ve already covered above why you don’t need multiple LLCs, there is essentially nothing holding you back from forming multiple LLCs. It’s mostly up to your preference in doing business. Looking back the advantages and disadvantages of doing DBA’s under a single LLC, it may be wiser to set up multiple LLC’s as to protect each of your businesses from liabilities separately.
Do beware, choosing to form multiple LLCs will cost you. Forming LLCs and maintaining comes with formations costs, annual renewal costs, charges for acquiring Registered Agents, and employees such as bookkeepers or accountants to maintain tax filings separately. Some states have very high charges for LLC formation (though charges vary by state).
Additionally, there are many other hassles such as filing amendment articles, acquiring licenses, EIN, bank accounts etc. will need to be fulfilled for each LLC you start.
An effective method of running multiple business under an LLC without creating multiple DBAs is by establishing what is known as a Series LLC. This LLC type acts as a ‘parent,’ and administers the regular LLC’s registered under it. Commonly, the LLCs under a series LLC are known as ‘child’ LLCs.
This is a good option as it protects other child LLCs separately from liability and allows for an isolated method of handling them. Unfortunately, not every state offers series LLCs so you will want to check if the state you want to set up your LLC in, offers you the option of doing so.
Apart from isolated protection, you can also file bankruptcy for one LLC without affecting the remainder child LLCs. And while each LLC will have a personal management team running it, series LLCs provide a flexible and strategic operational functioning, giving plenty room for the LLC to grow. It will also be significantly easier to take loans and fundings from banks.
The disadvantages of a series LLC contains the need of filing amendments and other necessary maintenance expenses which will be in excess. Moreover, there will be a new level of management that comes with a series LLC because it only governs and doesn’t provide any other services. This can lead to conflicts in decisions and conflicts pertaining to management styles.
Organization is key with series LLCs to make sure your business operate wit smooth flow as you will need to make sure there are more compliance concerns followed at local, state and federal levels, and hold each LLC’s documents within that child LLC.
Before you decide which multiple LLC formation method you want to go with, you need to be sure you have the right guidance and resources to do so. There is no point in causing your business drawbacks before it is even setup and operating. BizInc makes a great option to get the guidance you need as we want to do right by your business and our jobs are to simply make yours easier for you!