- Multiple businesses can be part of one LLC.
- You can have an unlimited number of LLCs.
- An LLC uses the so-called “pass-through taxation” method.
- One LLC can have multiple DBAs.
In business, having an idea is not enough to profit from it. You must find ways to protect and build upon it. That is why you need to incorporate it and, from there, begin your business journey.
Creating an LLC is the starting point. But don’t let this simple statement fool you—an LLC requires a lot of thinking to ensure your product and overall business stay afloat in the future.
Can you have multiple businesses under one LLC? How many DBAS can an LLC have? Will maybe separate LLCs for each project work better? All of these questions need answers before you decide to start a limited liability company.
For that reason, we created this article and emphasized several key points every aspiring business person should know.
How Many LLCs Can You Have?
Creating a structure of several LLCs is an interesting subject for many business owners. But you must wonder, “How many LLCs can you have?”
Legally, you can create as many LLCs as you want. At the same time, you can merge these businesses under one LLC. What approach you take is entirely up to you, as each one has its pros and cons.
The Benefits of Running Multiple Businesses Under One LLC
Many attorneys and experienced businessmen advise always opening several LLCs for different businesses. However, operating all of them can be difficult, which is why the option to have an “umbrella LLC,” i.e., one LLC for several businesses, exists. Here are some of the biggest benefits and an explanation of them.
Simplified Business Structure
In an LLC, the members themselves can take on the management responsibilities or hire a group that would take on the role of management. This is entirely different from a corporation, where there is a board of directors.
When managing multiple businesses from one LLC, you won’t need to hire several managerial groups. Hence, the business structure is simplified, and any changes to its work can be swiftly implemented.
Cost Savings
If you operate several businesses from one LLC, naturally, there will be less costs. Namely, you won’t have to deal with maintaining an additional legal entity. But that is not the only way where you can reduce payments.
When choosing an LLC for your business, you gain various tax advantages. The IRS provides four tax designations for LLCs:
- Single-member LLCs sole proprietorship;
- Multi-member LLCs general partnership;
- Single LLCs S or C corporations;
- Multi-member LLCs S or C corporations.
In general, LLCs are not subject to corporate taxes unless it chooses to be taxed as a corporation. Instead, profits generated by the LLC are passed through to the individual owners and treated as personal income.
This tax structure, known as “pass-through taxation,” allows owners to avoid double taxation. And if you have only one LLC, that means that you won’t have to pay more taxes. It’s interesting to note that in the US, LLCs bring 9.8 percent of the total partnership returns, according to the IRS.
Branding and Reputation
Building a noticeable brand is key if you want your business to flourish. And once established, anything connected to it will bear a certain element of recognition. Adding several businesses under one LLC can help you boost the brand of the holding company. This will, in turn, give more recognition and repute to the separate holding company names themselves.
Legal Considerations for Having Multiple Businesses Under One LLC
As we mentioned, starting an LLC requires some thinking. Legally speaking, several things need to be taken into consideration, especially if you want to combine a few businesses under one LLC.
LLC Formation
The first legal consideration is, of course, the formation of an LLC. You need to create an “articles of organization”—a legal document used to establish an LLC. It includes basic information such as address, members, business name, duties, liabilities, etc. You can file this document with the Secretary of State for most states, but note that there are filing fees.
Operating Agreements
An operating agreement for an LLC is a customized document that tailors the terms of a limited liability company to meet the specific requirements of its members. It serves as a structured framework for making financial and functional decisions. Simply put, with an operating agreement, members don’t need to follow the default state-given rules.
Comparable to “articles of incorporation,” an operating agreement is not typically mandated by most states, yet it holds significant importance as an essential component when establishing an LLC. By signing this document, each member has to abide to the agreed rules.
These documents cover all internal affairs of the company. If the question, “Can an LLC own another LLC“ is on the table, it can be solved only by implementing and regulating it in the operating agreement.
Registering Multiple Trade Names
As mentioned above, if you want to combine several businesses under one LLC, it is possible, but you must state that in your operating agreement. For this, many choose to use DBAs or “doing business as” (also known as trade names)—names used to describe when an individual or a firm works under a name that is not its legal one.
Practical Strategies for Managing Multiple Businesses Under One LLC
Managing multiple businesses under one LLC is hard at the beginning. Luckily, some strategies can help you simplify this task. Below, we offer a few of the most common LLC examples of running several trade names under one limited liability company.
Clear Business Segmentation
It’s important to place distinct lines between the businesses that fall under the same LLC. Since these are all under one holding company, all profits go in one place. However, not all of them have the same share. This inadvertently includes market segmentation, based on dividing the target market into several groups that are easier to approach and win over.
Bookkeeping and Accounting
Bookkeeping and accounting are two of the main pillars on which your business stands. If you’re planning on operating an LLC with multiple trade names under it, then this matter is that more important.
Business owners can set up and maintain bookkeeping in many ways. In this case, you need to mind that you’re doing this for several businesses, meaning that having a clear view of each one’s financials is imperative.
Although some companies use the traditional, hard-copy method, there is a more effective way—digitalization. You can use many computing and data analysis tools for this, such as Excel.
Communication and Documentation
Hand in hand with financials is documentation. To make sure that there won’t be any future repercussions and legal cases against you or to ensure you are well protected if one happens, you need to have your legal documents in order.
Of course, communication in an LLC that manages several businesses is also vital for smooth operations. Considering that you’re essentially running several firms, you need to preserve good communication and collaboration within and between each one to ensure the businesses work together (regardless of whether or not they’re connected).
Risk Management
Every company must have a risk management strategy. This is a preventative plan that would make sure any potential danger is taken care of swiftly and with minimal damage to the firm.
Having this in mind, it is even more essential when talking about businesses that are connected to each other by one LLC. Namely, since trade names placed under one LLC share all income and losses, that would mean that any harm done to one business would reflect on the other as well—financially and on their reputation. For example, a lawsuit against one business can endanger the assets of all other businesses under the LLC.
Potential Challenges and Mitigation Strategies
Although running an LLC with multiple businesses combined can be a good idea, as we said, many still advise against it. It’s mainly because of reasons such as the connected assets and the potential of endangering them if one business is held liable on a matter. Below, we explore other challenges and potential mitigation strategies.
Conflicts of Interest
It’s not unusual for business owners to have additional business ideas and personal interests, which can lead to potential conflicts of interest. Usually, several businesses run under one LLC have multiple members; hence, their ideas are bound to contradict at one point.
A properly structured agreement that will be set among the owners will most likely identify and cure most conflicts of interest of this nature.
Scalability and Growth
Since there may be a conflict of interest in this type of LLC-run business, it can impede any potential growth of the holding company and all attached ones. Scalability issues can also pose the same problem if not resolved among the members as soon as possible.
Compliance and Regulations
Each state has separate LLC laws that must be followed from the moment of incorporating the legal entity. Seeing that LLCs can be owned by individuals and corporations, both domestic and foreign, as stated on the official page of the IRS, everyone must comply with the state laws where the company is created.
Not meeting these obligations can result in (usually) monetary punishments for the companies involved. And as we explained, a penalty on one business automatically reflects on the assets of all other businesses working under one LLC.
All of this is on a higher level, i.e., business-to-state laws. The same can also be said for internal affairs. Namely, all owners or managers need to make sure that the operating agreements are in compliance with the laws and that all employees follow the rules, rights, and regulations stipulated in them.
FAQs
Can an LLC own another LLC?
Yes. These two enter a so-called parent-subsidiary relationship.
How many DBAS can an LLC have?
Interestingly, you can have as many DBAs in an LLC as you please. Business owners who want to expand their LLC in any way can add as many trade names as they want, as long as it corresponds to state laws.
What are the different types of LLCs?
Several different types of LLCs exist, including single-member LLCs, multi-member LLCs, domestic LLCs, foreign LLCs, series LLCs, L3C Company (which is a low-profit LLC), anonymous LLCs and many more.
Conclusion
Running multiple businesses with a single LLC is possible, albeit somewhat challenging. Many choose this option simply because it reduces maintenance costs on all other firms and can be quite simple to keep track of all profits. However, cons, such as asset susceptibility to depletion, if one business fails can deter businessmen from this path.
If you believe that this type of legal entity is for you, then make sure to first read up on it. See what challenges you may face and recheck the tips we provided above.