A limited liability company (LLC) is a business entity under which you can operate your business. You can run more than one business under a single LLC by either running all of your businesses under the same LLC name or registering each of your businesses under a DBA (doing business as) name.
If you have more than one business, you can choose to operate each under a different LLC or operate them all under the same LLC. Each of these choices has benefits and drawbacks.
What is an LLC?
An LLC provides protections typically only available to corporations while having a simple structure that appeals to sole proprietors.
LLCs separate your business and personal assets and liabilities and, therefore, provide legal protection for your personal assets from business debts and lawsuits.
LLCs are automatically taxed as either a sole proprietorship or a partnership. Whether you have one member or multiple, each reports their share of the business’s income and expenses on their personal tax return and pays income tax on their share of the business’s profits. Since members of an LLC are self-employed, they are responsible for paying self—employment taxes on their share of the business’s profits.
These are not the only tax options for an LLC. You can elect to have your LLC taxed as an S-corp or a C-corp. These options may reduce member (owner) taxes and allow them to participate in company benefit programs.
What does DBA mean?
If you have an LLC named for one service you offer and you want to offer a completely unrelated service, it’s a good idea to register your new business using a fictitious name statement or DBA.
A DBA allows you to operate a business under a different name than your LLC or your name as the business owner. The default name for a business is either the name of the person or entity that owns it.
DBA requirements vary by state, county, city, and business structure. Typically, the process involves searching to ensure the name is available, completing paperwork, and paying a fee. You may also need to provide public notice of your DBA name.
What are the benefits of operating multiple businesses under the same LLC?
Operating multiple businesses under the same LLC can simplify management and paperwork requirements.
What are the potential drawbacks of operating multiple businesses under the same LLC?
An LLC, as a separate business entity, protects your personal assets by keeping them separate from your business assets.
If you operate multiple businesses under the same LLC, the assets of one company could be at stake if a lawsuit is filed against one of your other businesses under the same LLC.
If you choose to operate each of your businesses under their own LLC, you isolate the liability of each business. Each business would have its own assets, debts, and liabilities.
What are the potential benefits of using a different DBA for each business?
Even if you choose to operate all your businesses under the same LLC, you will need to separate their identity to make banking and record keeping more manageable and to give each business a personal brand.
When you start a new business, it will be recognized by its branding: your business name, logo, website, and other marketing aspects. Most people choose their DBA name to make their services recognizable to potential clients.
What is a Series LLC?
A series LLC is an LLC under which each company is divided, not a separate series. Each series operates as a separate entity and has its own assets, liabilities, and members.
Unlike a DBA, which commingles liabilities and debts under the same LLC, a series LLC provides liability protection for the assets in the same series.
Only certain states allow series LLCs. If you are planning a new business, talk to your fee-only financial advisor about the best operating structure to protect your business and personal assets.
What is a holding company?
If you have multiple businesses, another option is to create a separate LLC for each one and hold them under your primary LLC. The holding or primary LLC is frequently called the umbrella or parent company.
Holding companies can provide both liability and tax benefits. When structured correctly, the parent LLC and each of your other LLCs are protected from debts and lawsuits against your other LLCs.
Potential drawbacks of a holding company are increased complexity, paperwork, and costs.
There is no one-size-fits-all guide to investing in businesses. Working with a wealth manager who uses a fee-only financial planning structure can ensure you make the best financial decisions for yourself and your loved ones. Ready to secure your financial future? Call us today at 866-395-1786 to get started.