Clients also ask:
It’s a situation that comes up quite often among entrepreneurs.
Your limited liability company (LLC) is doing well and you find yourself with several new ideas for viable-sounding enterprises.
Multiple Businesses Under One LLC?
While using both businesses under one LLC may offer you some shortcuts, such as simpler business control and only one annual filing fee, in the long run, these shortcuts are probably not worth the growth in potential risk.
An Increase in Potential Risk
The benefit of an LLC is the limited liability it affords its proprietors. When you run two different businesses under two different LLCs, the assets and income of each company are also protected from any disadvantage risk which might affect the other company.
If you combine two businesses within one LLC, however, the assets and income of each business are no longer isolated from each other, and each is at risk of any legal claims that might be directed against the other.
Say you run an editing business using the same LLC that uses your dog walking business, and one of the dogs you’re wandering gets injured while under your care. It’s not just the assets and income of your dog walking business that will be exposed to liability.
The assets and income belonging to your editing business will also be exposed to any legal claims which might be filed against your dog walking company as a result of the happening.
Separate LLCs Make Sense
Additionally, setting up an LLC is not an overly complex business, nor is running and maintaining one. If your new business idea is a viable one, it pays to put thought into the long-term now and set up a different LLC for it.
LLC Holding Company
There is, however, one scenario in which it might make a feeling to have two businesses under one LLC — the case in which you’re using your LLC as a holding company. A holding company LLC is an LLC that doesn’t have any operations; its main task is to own other businesses.
Can an LLC Own an LLC?
You may be wondering: can an LLC own another LLC? Most regions do not restrict who may own an LLC; if your region does not restrict the ownership of LLCs, it means an LLC may be owned by an individual, a corporation, or another LLC.
How Does It Work?
An LLC that serves as a holding company does not run any functions of its own. Its primary task is to hold the owner of other companies. In most cases, the holding company LLC will also own most of the support required to operate the other LLCs it owns. These different companies then lease the use of these assets from the holding company LLC.
For example, if the holding company LLC owns an LLC that runs printing operations, the holding company LLC might also own the printing equipment required by the printing company to run its business. The printing company in turn leases the printing gear from the holding company.
By structuring matters in this way, you obtain two levels of protection. The LLCs owned by the holding company LLC provide limited liability to their owner, the holding company. Since the holding company is also an LLC, it provides its owners with limited liability security.
It does require a certain level of effort to maintain a reasonable holding company LLC structure. It’s important that each LLC—the holding company LLC and the LLC(s) it owns—be properly maintained, with required government filings held up to date.
It’s also important that accounting, property, and revenue be kept separated to keep the limited liability protection afforded by each LLC intact.
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