Success runs on ideas that you have worked hard to turn into reality. Most entrepreneurs are driven by ideas for making business better, and often come up with ideas for a new service or product that is completely different from their current business. Fortunately, there’s no limit on the number of business ventures you can start up and operate, but a critical consideration is how to properly structure a new business and manage liability risks for the existing business.
The San Luis Obispo business attorneys at Toews Law Group, Inc. have some advice to help answer the questions about the best structure for operating multiple businesses:
- Create individual corporations or LLCs for each business
- Put businesses operating with registered fictitious business names (DBAs) under one corporation or LLC
- Creating a holding company for multiple businesses
The best structure depends on a number of factors, including tax liability, risk liability, capital and business goals. Meeting with an experienced business attorney is going to provide the best assistance for structuring multiple businesses. Other questions that can be answered include:
- Insurance coverage
- Business loans
- Employee matters including payroll and benefits
- Ownership of real and capital property
- Local licensing requirements
- Tax liability
The business attorneys at San Luis Obispo’s Toews Law Group, Inc. will also help you understand the pros and cons of each of the business structures.
Creating individual corporations or LLCs
An advantage of this solution is that each business is isolated from the other and risk to each individual business is minimized.
A downside is that because each business is a separate corporation or LLC, there is a significant maintenance effort. Separate fees and forms need to be filed with the state to form the corporation or LLC, separate taxes filed, separate business licenses and EINs.
Putting DBAs under one business
Using this approach, the corporation or LLC files a fictitious business name (Doing Business as, or DBA) for each individual business. Each new business operates as its own entity which simplifies marketing and brand recognition. Paperwork is simplified because the DBAs can use the same EIN registered to the corporation or LLC, taxes are filed by the corporation/LLC and each DBA benefits from the legal protection of the corporation/LLC.
One disadvantage is that if one DBA is sued, all DBAs under the corporation/LLC are liable.
Creating a holding company for multiple businesses
Create individual corporations/LLCs for each business under one primary holding company, which would also be a corporation or LLC.
This model can become complex to manage because each business has its own tax and legal obligations, but under certain circumstances may be the best structure. Forming a new company with the intent of selling it, spinning off a division of an existing company, or using the parent company to fund a new venture are a few examples.
Talk to the experts
There is no substitute for expertise and the business attorneys at San Luis Obispo’s Toews Law Group, Inc. can give you the correct answers to help you reach your business goals. From making sure all the corporation or LLC documents are filed correctly to advise for insurance coverage, handling financial matters, and the business structure for the best tax benefits, Toews Law Group, Inc. can help you gain the confidence that your businesses will meet your goals.
Call today for a consultation.