Business clients frequently ask if they can structure multiple businesses under one LLC. Generally, yes.
However, how you should structure multiple businesses depends on the circumstances and goals you have for your business.
Are you a young entrepreneur looking to launch your next venture as a different brand? Are you in the real estate rental business looking to minimize your liability exposure?
Perhaps you own a law firm and are looking to open a café down the street? In general, business owners looking to operate multiple businesses at once in Florida have three options for structuring their affairs. Let’s walk through the pros and cons for each.
According to Business Attorney Trevor Brewer, “The decision whether to combine business lines under a single company or maintain separate companies for each of them largely comes down to two factors: (1) the similarity of the business lines, in terms of opportunity and risk, and (2) the increased costs and risks associated with managing multiple companies.”
Set Up Several DBAs Under a Single LLC
It is common for a business to advertise and operate under different names from its legal one. DBA stands for “doing business as.” In Florida, a DBA is also referred to as a fictitious name.
A DBA allows you to operate multiple businesses under a different name than your own name (in the case of a sole proprietorship) or the registered name of your business.
For example, if you operate a retail business called “Brick-and-Mortar Retail Clothing, LLC” and subsequently decide to expand the business online, A DBA will allow you to use a more marketable name such as “RetailClothing.com.”
How Many DBAs Can an LLC Have?
Business clients frequently ask whether they can have multiple DBAs under one LLC. In Florida, owners of an LLC can apply for an unlimited number of DBAs.
A business can use a DBA to advertise and transact business. Florida law requires you to register your DBA names so that the public is aware of who is operating the business.
LLC owners must pay to register each separate DBA they wish to use. Note that a DBA can be registered at any time. You can apply for a DBA when you first register your new business. Or you can apply for a DBA later if you decide to make changes to your business later down the road.
Can I Use the DBA to Sign Contracts?
This is generally not a good idea. It is important to use your registered LLC name, and not a DBA when signing contracts or other legal documents. Customers should know that they are dealing with a limited liability company.
This would include service contracts, contractors, suppliers, and vendors. However, this doesn’t mean you must include “LLC” in every communication.
For example, you might not want to include “LLC” on logos or website marketing materials (However, you might disclose in the website’s terms and conditions).
What Are the Benefits of Running a Business with DBAs?
This arrangement is great for those looking to expand their business into a second brand but stays under one entity. After registering your DBA, you don’t receive any additional legal rights protections per see.
However, proper registration with the Florida Secretary of State serves to give notice to anyone else seeking to do business under the same DBA. An additional advantage of using DBAs is that it keeps administrative costs down. You don’t have to keep separate bank accounts, accounting, or operating agreements for each business.
What Are the Drawbacks of Running a Business with DBAs?
A DBA by itself does not create a separate business or legal entity. It is all part of the one LLC. This means that if you operate multiple lines of businesses under a single LLC, they all share liability. In other words, if one brand gets sued, it’s the LLC getting sued, not just that one DBA.
A DBA is not going to separate and shield the LLC from the debts and obligations of the other lines of business.
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Set Up a Holding Company
Another way to structure multiple businesses under one LLC is to set up a holding company. Under this option, you would create separate LLCs for each new business venture and “hold” them under your primary LLC. This arrangement is also referred to as an umbrella company or parent company.
Typically, the role of the primary LLC is to simply own the new businesses, while management takes place at the subsidiary level.
What Are the Benefits of Organizing My Multiple Businesses Under a Holding Company?
A holding company has two primary benefits. These are liability protection and tax benefits. With respect to the former, one example may be the owning and renting of real estate to college students.
Generally, if the owner owned more than one rental property, they would form separate LLCs for each of the rental properties.
This protects the parent company and each rental property from the liabilities of the other. For example, if the college kids had a party and someone got hurt and successfully sued the owner, the parent business and all the other subsidiary properties would be protected from collections.
As long as you abide by your state’s LLC laws, your liability is limited to what’s in that LLC.
A nice thing about an LLC is that you don’t have to file a separate tax return for each subsidiary LLC. This is because the income earned from each subsidiary flows to the parent company.
What Are the Drawbacks for Organizing My Multiple Businesses Under a Holding Company?
A holding company can be expensive to manage. It can also cost you a lot of money to keep up multiple LLCs. Note, that for Florida LCCs, the initial filing fee is approximately $100 with annual report filings at $138.75 per year.
In addition, owners typically hire registered agents for each separate LLC. A registered agent is one who receives service of process on behalf of your LLC. In Florida, a registered agent will run approximately $100-$300 per business per year.
Finally, an umbrella company is going to generate a lot of paperwork. The more LLCs you have, the more complicated your structure is going to be.
Create Independent LLCs for Each Business
Many business owners choose to form a new LLC for each of their business ventures. In Florida, there are no restrictions on how many LLCs a businessperson may create.
What Are the Benefits of Creating Independent LLCs for each Business?
Like creating a holding company, this option protects each LLC from the liabilities of your other LLCs. For example, a practicing doctor may decide to form an independent LLC for their new café venture.
In the event the doctor becomes personally liable to a patient for medical malpractice, that patient can’t go after the assets of the café business. That business is shielded from collections.
What Are the Drawbacks of Creating Independent LLCs for Each Business?
What’s the downside of this approach? Like the holding company option, creating multiple LLCs comes with substantial compliance fees and paperwork.
This includes registering articles of organization for each company, maintaining separate operating agreements, filing annual reports, and paying applicable fees for each LLC.
Furthermore, each LLC must obtain a separate employee identification number and its own business licenses and permits. Finally, each LLC must maintain its own records and bank accounts.
What Is the Difference Between Operating Independent LLCs Versus a Holding Company?
While operating multiple LLCs share many similarities with the holding company approach, the two options differ materially in one area: tax consequences. When there are multiple LLCs organized under a single holding company, it may be possible to file a single consolidated tax return.
This can result in a lower tax liability. In comparison, you must typically file separate tax returns for each LLC if you choose to operate independent businesses.
Consult with an Experienced Business Law Professional
Can you have multiple businesses under one LLC? Yes. However, how you should structure your businesses depends on the businesses’ unique characteristics and circumstances. Before embarking on your next business venture, consult with an experienced legal professional.
Our business law attorneys at BrewerLong have been helping Florida businesses with formation and other business law issues for over a decade. Contact us online today for a consultation.
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