Due to the flexibility of the Limited Liability Company (LLC) structure, it is possible to conduct different types of business under one company. Such a solution can be very convenient from the point of view of accounting and management. However, it should be remembered that the implementation of such an approach will require a careful analysis of all the advantages and disadvantages in each individual case. If you approach the issue thoroughly, having studied all possible nuances, then, having united under one LLC several types of business, you can provide reliable protection of your assets, save corporate funds and successfully solve other relevant problems.
Before combining several businesses under one limited liability company, which in essence is an LLC, it is necessary to make sure of the depth of your knowledge in the field of corporate law of the country of incorporation or engage professionals for this purpose. After all, working schemes for one jurisdiction can be dangerous from a compliance standpoint in another. So, let’s look at the options under which you can run two businesses under one LLC.
Why run several types of businesses under one LLC
To say that this solution of launching two or more different types of businesses under one LLC is very popular and frequently used cannot be said. Usually, entrepreneurs open new companies under each new type of business. But sometimes still the multi-tasking LLC solution has its place. This scenario can be used to separate an unprofitable company, optimize taxes, legally segment the business, thus providing asset protection. The solution will also be effective if it is necessary to optimize the business of an LLC that is part of a larger entity. Often an entrepreneur will decide to launch a new business in this format, the direction of which does not coincide with an existing project.
LLC of serial type
In this case, several LLCs are created under one “mom”, which work in different directions and do not depend on each other. Each company operates autonomously, receives separate profits and pays taxes independently of each other. Management of each type of business in this case is carried out separately. This solution has several pluses in the form of full legal independence of each company united under one parent type firm, the ability to separate profits from each type of business, and asset protection. The last point can be considered an advantage in the case if troubles in one of the LLCs will not cause bankruptcy or problems in others. Choosing a serial option, it is worth considering that the administration of such structures will cost a penny, and the size of the tax burden may increase.
Doing Business As (DBA)
An LLC can do business under a different name by utilizing Doing Business As. A DBA is a business name, actually registered, which can be legally substituted for the name of a trademark or specific company. It is worth noting that it is not necessary to register a DBA.
Among the advantages of such a solution can be highlighted versatility, because with the help of DBA you can legally organize the conduct of several types of business under one LLC in different directions without any difficulties. In addition, this business structure is extremely flexible, and the absence of the need to register one or more LLCs leads to a reduction in organizational costs.
But, as usual, this way of business also has its disadvantages in the form of lack of division of responsibilities. After all, if problems arise in one DBA, it can negatively affect other companies. Financial reporting and tax calculations are also hampered. Taxes are calculated for each type of business using the same LLC, which increases the administrative burden.
Utilizing a holding company
This business format involves having a parent company and several subsidiary type LLCs. There is no need to participate in all of the normal day-to-day business operations of each company, but the ability to control each type of business is retained.
Among the advantages of holding structures for conducting several types of business under one LLC can be noted simplified tax calculation, the ability to effectively maintain profit and loss accounting for each type of business in an independent format, maintaining full control over the subsidiaries, as well as savings in the conduct of real business.
But it’s worth remembering that such a solution will require additional funds to register each LLC. Yes, and to properly manage the holding company, you need to have special knowledge, otherwise you can make serious mistakes.
What aspects should you pay special attention to?
If an entrepreneur decides to launch several different types of business under one LLC, he must be prepared for the increase in costs and the need to attract specialists who are able to understand this intricacy of structures.The very registration of such a company and its support will cost a penny, as in this case there is an increased complexity of organizational measures.
Therefore, do not neglect the help of qualified professionals at all stages of the process.After all, to cover all the subtleties of corporate legislation in all business areas at once, it is extremely difficult and practically impossible for one person.
What else should be taken into account by the entrepreneur before starting to conduct different types of business under one LLC:
- It is necessary to take into account the legal requirements that apply in a particular state and country before creating a legal basis for diverse business activities under a particular LLC.
- Having an operating agreement in place will greatly simplify the management of complex structures organized under one LLC.
- Possible plans for scaling the business should be taken into account when selecting the best scheme for practical implementation.
- Before selecting a suitable option for the practical implementation of the scheme, it is advisable to categorize all the relevant purposes of such a step according to the degree of feasibility.
It is also recommended to engage lawyers and tax advisors to properly organize and manage multiple businesses within a single LLC taking into account all legal and tax aspects.
In general, using one LLC for multiple businesses is possible, but it requires caution and organization to avoid legal and tax problems in the future.
The use of business tactics, where several types of businesses operate under one LLC at once, is considered quite complicated in terms of implementation and further functioning of the project. Therefore, before deciding on such a scheme, it is recommended to carefully weigh the pros and cons, consult with professionals in this field and only after that make steps towards the realization of these plans into reality.
