Despite all the doom and gloom you hear about small businesses, it’s really not that bad. In 2021, 59% were still standing after six years, and 15% were still in business after 25 years!
Once you’ve established yourself, you’ll have something to be proud of for years to come. However, why not expand your company and grow your legacy?
One way to do so is to have several locations for your brand. But can you have multiple businesses under one LLC? And if you can, how do you make it happen?
Read on to find out all the answers to your questions.
Can You Have Multiple Businesses Under One LLC?
Can you use one LLC for multiple businesses? The good news is yes, you can do that.
If you’re now asking, “How do I put multiple businesses under one LLC?” then here’s how it works.
Single LLC, Multiple DBAs
You can register different DBAs (“doing business as”) or fictitious names for each business with your state or local authorities. With these, your LLC will be able to legally conduct business under multiple names, but without the need to form separate entities.
For example, let’s say your LLC is “Smith Ventures LLC.” With DBAs, you can operate “Smith’s Bakery” and “Smith’s Landscaping” without creating additional LLCs.
With that said, if you need to register an LLC, use our free business registration service. The only thing you’ll have to pay is the state fee.
Filing the DBAs often involves a simple registration process and a small fee. Do note that the requirements will vary by state.
Umbrella Structure
Once you’ve filed the DBAs, your main LLC will serve as the “parent” entity, encompassing all the businesses. It will be the legal entity responsible for:
- Contracts
- Debts
- Taxes
Each business can function as a division or branch. However, they’ll lack separate legal status.
This legal structure works really well for entrepreneurs who want a centralized management system while having diverse business operations.
Separate Branding
What’s great is that you can create distinct branding for each business, which enables you to cater to different markets. Using the examples from above, Smith’s Bakery can cater to housewives while Smith’s Landscaping can cater to busy working men.
Each DBA can have its own website, logo, and marketing strategy. As a result, you can make every dollar count in each business’s budget.
The Benefits of Using One LLC
Is it better to have multiple businesses under one LLC? We’d certainly say so. These are the benefits you can enjoy.
Cost Efficiency
When you form and maintain an LLC, there are state filing fees, annual reports, and possibly even a registered agent fee. Each time you form another LLC, your costs will go up.
By using a single LLC, you’ll avoid multiplying these costs. Plus, there’s no need to pay for separate tax filings, legal consultations, or insurance policies for each business. These can often be consolidated.
Simplified Management
When you only have one LLC, there’s only one operating agreement. In addition, there’s one set of bylaws and annual filing to manage. This will simplify record-keeping and reduce your administrative workload.
Tax reporting is streamlined too. The LLC files one tax return, and the income or losses of the various businesses are reported together (this is if the LLC is a pass-through entity, like most LLCs).
Shared Resources
If your businesses use similar assets (such as equipment, software, or office space), then a single LLC can own and allocate these resources among the different businesses without complex inter-entity agreements.
Plus, employees can work across the businesses, with payroll and benefits centralized under one entity.
Considerations and Potential Drawbacks of Using One LLC
As with anything, there are things to watch out for if you want to use one LLC for multiple businesses. Below are the main concerns you should know.
Liability
One of the biggest risks of using one LLC for multiple businesses is liability exposure. Should someone bring a lawsuit to any of the businesses under the LLC, then creditors can go after the assets of all involved businesses.
Complex Accounting
Yes, the LLC files a single tax return on behalf of all of the businesses under it. However, you have to maintain separate financial records for each to understand their performance. This is also necessary to properly allocate expenses.
If you aren’t on top of accounting, then you might face issues with taxes. Also, it may be difficult to assess which businesses are profitable or struggling.
State Requirements
In many states, you’ll have to register each DBA or trade name separately, even if they fall under the same LLC. In addition, there may be local requirements, like newspaper publication notices.
When you have to go through these registrations, not only do you face additional costs, but also administrative steps. This is especially true if you operate in multiple states.
Brand Perception
Customers can get confused or be skeptical if they find out that several businesses are part of the same LLC. They may think that you’re stretching yourself too thin, and that you’re mediocre at each business you’re trying your hand at. As a result, it can impact customer trust.
You can get ahead of this by being transparent about the relationship between the businesses. However, it takes great skill and careful communication to be successful.
Alternative Options
Let’s say that you’re very attached to your original LLC, and you still really want to operate multiple businesses. However, the drawbacks have made you hesitate, and you’re looking for other options.
We’ll give you two alternative scenarios you can consider.
Separate LLCs for Each Business
Forming an individual LLC for each business will create a clear legal separation between them. Each one is protected from the liabilities of the others.
This arrangement will definitely offer better protection. But it’ll also increase costs and complexity due to multiple filings, tax returns, and management needs.
Parent LLC or Holding Company
You can create a parent LLC or holding company to own multiple subsidiary LLCs. Each subsidiary is a different business, with liability protection for each.
In this arrangement, the parent LLC owns the assets and controls the subsidiaries. Each one then has its own operational autonomy and liability shield.
How Many Businesses Can You Have Under One LLC?
Technically, you can have as many businesses as you want under one LLC. You have lots of flexibility because of this, and the management structures can vary too.
But just because you can have numerous businesses under one LLC doesn’t mean you should. For example, there may be confusion in branding, or you may need to register each business separately.
Also, having DBAs under an LLC will be a different situation than, say, creating subsidiaries, in terms of tax implications, liability, and recordkeeping. These factors may impact your ability to create additional businesses under the original LLC.
Build Your Empire, Starting with an LLC
The answer to the question, “Can you have multiple businesses under one LLC?” is “Yes.” However, it may not be the best option since there are notable disadvantages.
You’re probably better off creating a parent company or holding company, as separate LLCs can be costly and complicated. If you’re still unsure, then consult with a professional to explore your options more in depth.
Sign up with Business Anywhere now to use our free business registration service. You can get a free year’s worth of registered agent services too.
