- The purpose of LLCs
- When should you consider having more than one LLC?
- How having multiple LLCs could benefit you
Q: Can you have multiple LLCs under one business?
A: Yes. It is completely reasonable to have one LLC for your primary LLC, but there can be surprising tax and other benefits to having multiple LLCs for your business verticals.
The limited liability company (LLC) business structure is one of the most popular ways of structuring companies ever. Rules vary at the state level, and many smaller businesses are content with one LLC. Established businesses, however, that have a diverse set of products/solutions to offer often find themselves asking, How Many LLCs can I have?
What is an LLC?
An LLC is a business license that is issued by the state you primarily reside in. LLC stands for limited liability company.
LLCs can be found at the intersection between a partnership and a corporation. LLCs are more flexible and require less paperwork than corporations yet follow the taxation rules of a partnership. LLCs do not pay taxes directly since the members of the LLCs report the taxes on their tax returns.
The owners of an LLC are called “members”. Generally, members of an LLC first choose a name and then construct articles of organization that will outline how the LLC will be run.
These LLC operating agreements determine the rights, liabilities, duties, and other responsibilities of each member of the LLC. There is also standard information included in LLC formation paperwork such as names and addresses. Submitting paperwork for an LLC requires a small fee that varies by state.
Let’s further explore the purpose of LLCs and why you might want to create one or more for your business.
The purpose of LLCs
The primary purpose of registering your business as an LLC is to protect yourself from the liabilities of your business.
Having an LLC will protect all the owners of the LLC from getting personally sued for something concerning the company. Sole proprietorships and partnerships cannot offer this kind of personal liability protection.
The first step is taking a moment to consider when you need an LLC.
Another purpose of LLCs is to create something called a charging order.
If one member of the LLC has problems that could affect the rest of the LLC, the charging order will ensure that the business is protected as well as the other member’s roles within the LLC.
LLCs allow for certain tax advantages. As opposed to corporations that are taxed twice, owners of an LLC can only be taxed once.
LLCs go through a taxation process called pass-through taxation. Pass-through taxation means that the taxes of the LCCs are passed through the business to be reported on the owners’ tax returns at the owners’ tax rate. This means that the business does not have to pay any federal income tax.
Another purpose of having an LLC is that they are generally inexpensive to create.
Some entrepreneurs/ Solopreneurs/ LLC partnerships with more than 1 to 2 members find it makes sense to break a company into more than one LLC. Let’s find out other reasons you might want to consider having multiple LLCs.
Read More: Sister Company: Making the Most of your LLC
When should you consider having more than one LLC?
You are probably wondering just how many LLCs you can have and when creating multiple LLCs makes sense.
You can create a new LLC for any business you want to create.
There is no limit to the actual number of LLCs that a person can create. It is perfectly legal to have more than one LLC.
There are a few reasons that having multiple LLCs make sense.
One of your businesses is at risk
First, you notice that one of your businesses is at risk of failing.
When you have more than one business, it is time to consider putting them into individual LLCs so that one business’s assets are not linked to the other should one unfortunately fail.
You have a new product launching
Another time you might want to consider dividing your business up into multiple LLCs is when you have a new product launching.
If you are unsure whether or not your new product will do well, it is best to divide your ventures into individual LLCs so that the well-being of your business is not liable for the possible failure of your product.
This may seem like thinking negatively, but it is a security blanket for you and your small business.
You may also want to consider registering for multiple LLCs when you own part of one LLC and decide to invest in another. This will keep your individual business endeavors untangled from one another.
When might you not want to consider having multiple LLCs?
Although there are many surprising benefits to having multiple LLCs for your businesses and clear signs of when you will want to create them.
You might wonder when you would want to avoid having multiple LLCs for your business.
Some states have laws that protect businesses from conflict of interest. If you find that by creating two LLCs, you will have a conflict of interest, it is best to avoid the process.
This complicates things because if you have a responsibility to one LLC and cannot fulfill it due to your responsibility to another LLC, it becomes a problem. In other words, you have to avoid violating your contract with one LLC while fulfilling the duties of another.
For example, if you own a restaurant and a food supply company, you may want to help the food supply company by giving it a contract to supply food to the restaurant. Because you would profit from the deal, you might be violating your responsibility with the hotel if there was a better deal available.
Deals such as this are permitted in some states when the agreement has been previously discussed and agreed upon with the other members of the LLC.
What are the duties of a member of an LLC?
Well, it varies from state to state but usually, it entails loyalty to the LLC.
There is also a specification between members of an LLC and managers of an LLC. The specific laws of what the duties are from member to manager vary from state to state.
To avoid unnecessary conflicts, it is advised to understand your state’s laws and requirements of LLC operating agreements.
However, when making a new LLC, there are other factors to consider.
You might want to be prepared for more paperwork since they are each taxed individually and not as one larger whole, even though it is one person that filed them. It is important to check with your local state laws to determine what is appropriate for your business.
You will need to open separate bank accounts for each LLC.
As you scale up your business by registering more LLCs, you will also need to consider that your office space also needs to be scaled up.
Thankfully, Alliance Virtual Offices is here to help.
Alliance Virtual Offices is a virtual office space that can grow with you no matter how many LLCs you may end up wanting to create in the future. Unlike a physical office space that you would need to expand with your growing needs, Alliance Virtual Offices is already ready for your growth.
Instantly boost your professional image with a virtual office space. Get a virtual business address for your growing business & have access to a live receptionist.
Read More: Opening a Bank Account for an LLC? Here’s What You’ll Need
Surprising benefits of having multiple LLCs for your business
When deciding the best way to legally structure your multiple businesses, you have options.
In today’s economic environment, it is important to understand how to protect your business.
You could create one LLC and multiple “doing business as”, or DBAs, for each of your other ventures.
You can even create individual LLCs but still have them under another LLC.
The most popular option, however, is creating multiple individual LLCs.
While having just one LLC is perfectly fine for your business, there are considerable benefits to having more. It is quite common for people to create more than one LLC.
Let’s consider the benefits of having multiple LLCs for your business.
Liability Protection
The first benefit of having multiple LLCs for your business is that since having an LLC already protects you from your business’s liability, registering for multiple LLCs will protect your individual businesses from each other.
For example, if you have 4 separate LLCs and one of them gets sued, the other three will not be affected. If all of these businesses were under the umbrella of only one LCC, they would all be liable. This is why it matters to have more than one LLC since it will protect you and your businesses if one of them incurs hardship.
In this way, it creates financial independence for you and your businesses. By dividing up your business into individual LLCs, each one of your LLCs enjoys this financial independence that could save your reputation as an entrepreneur if one of your LLCs needs to file for bankruptcy or goes out of business.
One of the most common examples of people creating more than one LLC is in the real estate investment market.
Property owners will create a new LLC for each property that they own. If any of the other properties have legal or financial trouble, the other properties will not come under fire as well.
For example, if one of your properties incurs a lawsuit, the rest of your properties will not be connected to the lawsuit thus protecting them from being collateral.
Imagine that one of your tenants in one of your many properties sues you for a fire started in the dryer with a type of dryer that was supposed to be recalled months ago. If the tenant were to sue you and your properties were not separated into multiple LLCs, when the tenant wins, the courts could take all of your properties.
If they are divided up into multiple LLCs, the court can only touch the property in question and your other properties are safe. This is why it is very common for real estate property investors to have many LLCs for their various properties.
Easier to split businesses apart and attract investors
The second reason there is a benefit to having multiple LLCs is that your businesses become easier to split apart.
When your businesses are all tangled together under one LLC, they become difficult to separate if you want to sell one of your businesses without selling all of the others with it.
This will also attract more investors to your business. When your established business is scaled into separate and distinct LLCs, investors will be more drawn into putting money into your business.
If your business is confusing and tangled between various business endeavors, investors will be less likely to be attracted to them because they cannot tell one from the other.
Since they are aware of the benefits, you should be too so that your business becomes easier to sell and you become more likely to turn a profit.
There have been cases of people that want to sell a part of their business but actually cannot because it is so tangled up with their other businesses under the umbrella of one LLC title.
If you divide up your businesses by having multiple LLCs, it will be much easier to sell them off individually and make a profit off of them.
Tax Benefits
A third benefit of having multiple LLCs is because of taxes.
Since each LLC is taxed individually, you could be taxed in a much lower tax bracket by having your businesses separated under multiple LLCs while their combined income of having them under one LLC might put you in a higher tax bracket.
Therefore, having more than one LLC for your small business might be the most economical option.
Privacy Protection
Another surprising benefit of registering your businesses into multiple LLCs is that it can provide privacy protection for owners or investors
The LLCs can be filed under names that are not the personal names of the owners. It is harder to connect the dots when your businesses are filed until multiple LLCs as opposed to being held under one umbrella that lists all of your ventures at once. Filing for multiple LLCs may be of interest to anyone interested in protecting their privacy or the privacy of their investors.
While the paperwork may be too much of a hassle for some, for others having multiple LLCs adds unexpected benefits such as saving money on taxes, protecting yourself and your other businesses, and being able to easily sell one of your businesses.
As with any situation, you need to make the choice that is best for your unique business.
A real estate company that wants to file each property as an individual LLC may make a very different choice than a painting company that paints commercial and residential houses that wants to keep their business together under one LLC.
You might want to consult with accountants or a business attorney to make the best decision for your specific situation.
Cons of having multiple LLCs
One of the main cons of having multiple LLCs for your businesses is that it requires additional paperwork.
Creating multiple LLCs for your business could also be costly.
It would be better to consider scaling your multiple businesses through LLCs if your business is already well established so that you can occur these fees without hassle.
You will need to pay the LLC fee to the government for each as well as annual fees to the state.
In addition, you will need individual business licenses for each LLC which you will have to file separately.
You will also need to file individual tax forms for each, which could end up being an added benefit depending on your situation.
Each state has very specific laws as to what the rules are for LLCs in their area so it is important to check with your local laws. It may be beneficial to choose the best state for LLC formation that would best benefit your business.
Although there is more paperwork involved with registering more and more LLCs, there is much less paperwork in the end if you decide to sell off one of them.
Conclusion
There is absolutely no limit to just how many LLCs you can create.
Although it can involve more paperwork, creating more than one LLC for your business can have surprising benefits.
Creating multiple LLCs can allow you to protect yourself and your businesses, easily sell your businesses, attract more investors to your business, protect your privacy, and save you money on taxes.
Although it can be majorly beneficial to have multiple LLCs for your business, it can be challenging to manage all of them on your own.
Your office space will need to expand as your businesses expand.
This can be especially challenging if work remote or often travel for work.
Don’t settle for address-only mail plans. Work flexibly in a professional space from Alliance Virtual Offices.
Further Reading
- Here Are the Benefits of Multiple LLCs or Corporations for Your Businesses
- What’s the Best Way to Legally Structure Multiple Businesses?
- Can I have more than one LLC?
- Small Business LLC or DBA? The Pros and Cons
Alliance Virtual Offices has been in this area since 1992 and can set you up with flexible, on-demand workspaces for all of your LLCs, allowing you to work from wherever they want but also have established business addresses.
It can be confusing having multiple LLCs and trying to manage reception for all of them in one office.
Alliance Virtual offers live receptionist plans that can keep track of your LLCs office needs.
Get set up quickly and easily with the help of our 5-star staff. Our team is here to help you every step of the way.
Trusted by over 15,000 businesses worldwide.
Alliance is your Virtual Office partner. We’re here to help you achieve long-term, sustainable growth for your business and multiple LLCs.
After learning that you can divide your business into as many LLCs as you want, you may be beginning to consider purchasing an address for one of your new LLCs or wonder about how to purchase a virtual business address.
Divide up your LLCs without the hassle of having to purchase multiple offices. Don’t spend needless money on having multiple office spaces for your multiple LLCs and staff for your businesses when you can do it all virtually through Alliance Virtual Offices.
Make each dollar count with flexible office space on an as-needed basis.
