If you already have a limited liability company (LLC), and you get an idea for a new business, you may wish to embed that new company within your established LLC. Here’s what you need to know:
Running more than one business with one LLC
You can technically operate more than one business within the same LLC. To distinguish each brand, you’ll probably want to obtain a fictitious name (or DBA) for one or both businesses. The appeal of operating two businesses out of one LLC is that you’ll save time and money by only filing one business entity with your state. However, this business plan can come with some risks you should be aware of.
Risks of using one LLC for multiple businesses
The great benefit of forming an LLC is the liability protection it affords. At the most basic level, an LLC separates business assets from personal assets, which protects business owners. But for business owners with more than one business, creating multiple LLCs also protects those businesses from each other.
For example, if you own a profitable donut shop then decide to open a store that sells nothing but Brussels sprouts, the debt you might accrue from your Brussels sprout business (assuming it doesn’t go well) won’t affect the profits of your donut shop one bit—IF each business is formed as its own LLC. If your donut shop and your Brussels sprout store are both housed under the same LLC, however, your donut shop can be held liable for the debts of your Brussels sprout store.
Reasons for getting a DBA for your LLC
A DBA (doing business as) name is not your company’s legal name, it’s more like a pseudonym. DBAs are popular with sole proprietors who use their own name to file legal documents (like taxes) for their business, but might not want to use their name as the name of their business. LLCs can also obtain DBAs, which can be very helpful in certain scenarios:
- Separating products: if your business branches out into different products, having separate DBAs may help you keep track of each one separately.
- Separating services: similarly, having different DBAs for different services can help you keep track of each service’s profitability.
- Online sales: if you own a brick-and-mortar store that also does online sales, you may want a DBA to keep track of these two aspects of your business, separately.
There are other reasons you may opt to get a DBA for your LLC. Just know that getting a DBA does not form a new business, or protect your current business from liability. It just gives your business—or an aspect of your business—a different name.