Last Updated on August 13, 2020
Pretend you own a construction business. A few years into it, business is good and you decide to start a new business as a real estate investor.
You know you want to protect them both, but you’re not sure how to do it, and the thought of maintaining separate LLCs sounds exhausting (or impossible). What do you do and how do you move forward?
There’s good news! You can legally do it all under one roof. But the golden question… is how?
If you’re not sure how to answer those questions or find yourself in a similar situation, you’re in the right place. In this article, I cover how to run more than one business under a single LLC and how to get started.
Let’s dive in!
How to Run Multiple Businesses Under One LLC
As I mentioned, you’re legally allowed to run multiple business ventures under one LLC. Many small business owners choose to use one Parent LLC as a holding company to save money and time rather than maintaining two separate LLCs.
In the example above, we used two semi-related businesses. But you can still use one LLC to provide personal liability protection and cover both companies even if they are different types of businesses.
Related: How does an LLC protect you?
Now, let’s take a closer look at your options and how to do it.
Use One Limited Liability Company for Both Businesses
If you already have an LLC, you already know it separates the business assets from the LLC member’s personal assets. The same main LLC can also be used to house individual businesses under the same LLC umbrella.
If each business within the LLC is going to operate under a different name, in most states, each business will have to register a unique legal name. For instance, you may have “Affordable Construction” as the name of the construction business, but want the investment real estate company to be known as “Heartland Investments”. If you plan to operate using different business names, you will need to file a DBA (“Doing Business As” also called a “fictitious name” or “assumed name”) for each business.
Note: In some states, multiple DBAs may be necessary to cover these separate businesses.
Having one LLC simplifies things because you only have one registered agent, articles of organization, annual report, tax returns making for an overall lower cost than managing several different LLCs.
However, going this route means the LLC and all affiliated companies can be affected for the actions, business debts, etc. of the other. So while you still personally protected, the two companies are tied together legally. Referring back to our example, if a renter gets hurt in one of the properties and sues the rental business, the assets of the construction company is also at risk.
How Do You Add a DBA to an LLC?
The process to file a DBA in most states is varies based on the type of business structure. To register a DBA as an LLC or corporation is different from a sole proprietorship or general partnership. Most LLCs and corporations will register their DBA name with the Secretary of State or other state entity that is in charge of handling entity registrations. Before filing, a name search will be needed as each name will need to be unique.
For LLCs, you need to file the correct name registration form with your Secretary of State. You also need to pay the initial filing fees associated with your DBA, which range from $10 to $100. Some states will also require an announcement of the new business name in a local publication, depending on the requirements set forth by your state. Furthermore, some states require DBA renewals annually.
Scroll to the bottom of this article for more information about your state’s requirements for filing a DBA.
Do you need a DBA for your website address if it’s different from your business name?
From the above example, if your construction business is named LLC is “Affordable Construction.” and you have a website with the URL of “OrlandoAffordableConstruction.com,”. A common question is do you need to file a DBA for the website? In this case, no. Now if you were transacting business under (or having checks written to) the name Orlando Affordable Construction you would need to register the DBA.
Related: Do I need a DBA for my website?
Use a Series LLC
Alternatively, if your state permits it, you can create a series LLC that allows you to operate multiple LLCs under one legal entity. With a series LLC, you have one parent company with several “individual LLCs” underneath it.
The main benefit of creating a series LLC is that each entity under the parent LLC operates as a separate business entity. This means there’s a level of separation not only between you and your companies but also between each company you own. So any debts, liabilities, and lawsuits from one series, won’t affect the others in the series.
More commonly used for real estate because of the liability protection between individual properties; property A is separate from property B and so on, it can also be used to house multiple businesses as well.
Using a series LLC is also more affordable than creating a separate entity for each business. However, because most states don’t allow series LLCs, it may not be an option for you, depending on where you register your business. Another benefit to the series LLC is that each series can have a different Employer Identification Number (EIN), tax ID number, LLC members, bank accounts, and tax returns.
The states that DO allow the creation of series LLCs are: Alabama, Delaware, the District of Columbia, Illinois, Indiana, Iowa, Kansas, Missouri, Montana, Nevada, North Dakota, Oklahoma, Puerto Rico, Tennessee, Texas, Utah, Wisconsin, and Wyoming.
A Safe(r) Bet: Create an LLC for Each Business
If you can’t create a series LLC in your state, your best bet is to create a separate LLC for each business you own. This is the safest way to protect yourself and your companies from lawsuits and liabilities imposed on one of your entities.
This way, the assets associated with each entity are entirely separate from those of the other businesses you’re running.
When operating multiple businesses under one LLC, even though there are technically multiple businesses running under the legal protection of the LLC, the Internal Revenue Service (IRS) only considers it to be one entity. This can be an issue especially when one of the businesses is going to be sold out of the overall LLC. Since there are only one set of tax returns, it is a lot cleaner for the prospective of the buyer to evaluate a single business rather than splitting out the income and expenses of multiple businesses.
Creating a new LLC means an extra set of paperwork, bank accounts, filing fees, and more work at tax time. Furthermore, each LLC requires registering a new EIN. So yes, it’s more work to maintain separate LLCs. But each business’s assets are thoroughly protected and could save you (and your businesses) in the future.
Are you interested in registering a new LLC? Check out the complete LLC formation guide to get started!