WAYS TO LEGALLY STRUCTURE YOUR DIVERSE BUSINESS VENTURES

Many of today’s entrepreneurs are not mediocre who settle for less, which is the more reason why many of them engage in so many businesses. One may start up a wine shop and at the same time, start up a baby clothing shop. The ability to have multiple channels of income is an excellent strategy always to experience new opportunities per time.

So, if you are engaged in more than one business or probably looking for a means to start up new businesses; you’re surely curious to know the best way to structure your business legally. That is, you want to know if it is right to have separate corporations/LLC for each business or a parent holding for all and if there is a limit to the number of companies you can start up.  

There are three ways in which you can structure more than one business, although each method comes with pros and cons which you must understand. The best approach depends on your discretion and individual situation.

In this piece, we’ve compiled some general advice on ways to legally structure your various business ventures. Also, you can seek counsel on your desired needs from a Certified Public Accountant (CPA) or business attorney.

START-UP PERSONAL CORPORATIONS/LIMITED LIABILITY COMPANIES (LLCS)

You must understand that there are limits to the number of LLCs you can start up, although, some entrepreneurs open a new LLC for every start-up they own. Take, for instance, you can have an LLC for cleaning business and also another for a painting start-up.

The significant benefit of this way is that it isolates the risks in each of your businesses. Should your cleaning business have issues, your painting business will not be affected. Also, if your painting venture experiences a storm, your cleaning business won’t partake in any of the loss.

However, the major disadvantage is that it requires extra maintenance charges and paperwork. For instance, it is required of you to pay to incorporate or start-up LLC for each business, at the same time, taking care of any annual maintenance fee to the government. More so, you will need separate business licenses, and you’ll file tax form for each corporation. Some entrepreneurs find this excessive paperwork frustrating and not necessary, while some see the extra fees as a good way to protect a personal business from others.

Basically, property investors that are real estate investors form LLC for every of their property to be able to protect each of them. A problem with “Property A” won’t affect “Property B” or “Property C.”

MAKE DBAS UNDER THE SAME CORPORATION/LLC.

The second way is to file one LLC or corporation, then form more than one DBAs (Doing Business As) for every of the business. From the example I gave earlier, you can have LLC for “Pat’s cleaning Services” and file a DBA for “Pat’s painting business” if you have it as an extra business. Marketers would advise you run each business as individual companies; make use of each business and honor checks written to each business name.

With this method, each startup can use the perfect branding and company name, at the same time, simplify some of the annual maintenance fees. This is because you only have to take care of the yearly LLC maintenance fees for the particular LLC (and not individual DBAs). Also, you only need one EIN if you peradventure use or need one. You can use the money earned from each DBA and record them in a single tax filing under main LLC when the time to file your taxes approaches.

Each start up partakes of the legal protection of the main LLC. For instance, your assets will be protected if anything eventually happens to one of your DBAs. But then, your DBAs are not shielded from the other DBAs, which means, any issue with one DBAs means an issue to every one of your other DBAs under the main LLC/Corporation.

START UP A BUSINESS UNDER THE HOLDING COMPANY.

In this last approach, it is possible to form personal corporations for each of your businesses and ensure they are all under one main holding corporation/LLC. This is widely known in some cases such as in companies that are up for sale or stop one of their businesses; also, in well-established firms that are interested in starting a new business and fund it. These cases have complicated legal and tax issues, but consulting a tax adviser or attorney on the structuring of a holding company and subsidiaries can go a long way in helping the situation.

Conclusively, the basis is that you don’t have any legal limit to the number of businesses you can successfully start. All you have to do is to ensure you put proper consideration to your liability risks when planning these businesses.

Good luck!