Question: I own two separate businesses. Should I have a separate LLC for each business?
Answer: Yes.
Answer: Yes.
Disadvantages to a Single LLC
Limited Liability. A limited liability company protects you from personal liability. A limited liability company does not protect businesses from legal liability. Multiple businesses under one LLC umbrella will not protect one business from legal claims against another business.
Example: You own three businesses: a restaurant, a rental property, and a printing business. All three businesses are under the same limited liability company, Frank's LLC. A slip and fall injury occurs at the restaurant. The resulting damages from the injuries are in excess of $500,000. Frank's LLC only has insurance for $250,000. The injured person could seek the remaining $250,000 from all three of Frank's LLC's businesses: the restaurant, the rental property, and the printing business. The outcome of a slip and fall injury at a restaurant is now having a detrimental impact on the other two businesses.
Licensing. A single LLC will need to file a DBA ("doing business as") for each business. You may also need special permitting for each business as well.
Example: You own three businesses: a restaurant, a rental property, and a printing business. All three businesses are under the same limited liability company, Frank's LLC. A slip and fall injury occurs at the restaurant. The resulting damages from the injuries are in excess of $500,000. Frank's LLC only has insurance for $250,000. The injured person could seek the remaining $250,000 from all three of Frank's LLC's businesses: the restaurant, the rental property, and the printing business. The outcome of a slip and fall injury at a restaurant is now having a detrimental impact on the other two businesses.
Licensing. A single LLC will need to file a DBA ("doing business as") for each business. You may also need special permitting for each business as well.
Advantages to a Single LLC
Simplicity. Under a single LLC, you can combine the income from each separate business and file it under the same tax return. You only need to pay one annual withholding fee of $800 per year. You only need to maintain meeting minutes for one LLC.
Although under a single LLC you may file a single tax return, the commingling of assets and sales information may complicate performance reviews of the businesses.
Although under a single LLC you may file a single tax return, the commingling of assets and sales information may complicate performance reviews of the businesses.
Disadvantages to Multiple LLCs
Owning and maintaining multiple LLCs will be more expensive. Forming each LLC will cost money, including attorneys fees and filing fees. You will also have to pay the minimum withholding tax of $800 per year for each LLC. Your accounting fees will likely increase as well.
Owning and maintaining multiple LLCs will make your life more complicated. Each LLC will need to keep up with corporate formalities, including keeping separate bank accounts, separate meeting minutes, no commingling of assets, filing separate tax returns and maintaining separate accounting books. Operating a single LLC can be time consuming, but operating multiple LLCs can be a big headache.
There are possible solutions to some of the issues, like a Qualified Subchapter S Subsidiary Election. Learn more about QSubs on the IRS website.
There are possible solutions to some of the issues, like a Qualified Subchapter S Subsidiary Election. Learn more about QSubs on the IRS website.
Contact Sacramento Business Attorneys
Our business attorneys provide detailed consultations discussing the benefits of filing multiple LLCs or having multiple businesses under one LLC. We will work with you in deciding whether setting up multiple LLCs is a good idea. Sometimes, its best to wait and determine the success of a startup business before paying the extra filing fees.
Our Sacramento business law attorneys also assist with all necessary corporate formalities, including, for example, meeting minutes, resolutions, operating agreements, and membership certificates. Our Sacramento business attorneys understand limited liability companies and can help you understand too. Contact our law office to schedule an initial consultation.
Our Sacramento business law attorneys also assist with all necessary corporate formalities, including, for example, meeting minutes, resolutions, operating agreements, and membership certificates. Our Sacramento business attorneys understand limited liability companies and can help you understand too. Contact our law office to schedule an initial consultation.
Call Us: (916) 669-8400
*The information provided in this post does not constitute legal advice or opinion. The information is for guidance purposes only. Individual situations vary and you should contact an attorney for a consultation. This post is considered a solicitation and advertisement. The post does not warrant the outcome of any matter. Sacramento Business Lawyer on the Multiple LLCs or Single LLC.