Starting just one successful business is a huge achievement. Many entrepreneurs want to strike while the iron is hot and establish a second company. However, it is important for all business owners to understand how to properly structure this new entity. While it is certainly possible to establish more than one company under a single LLC, most entrepreneurs will be better off creating a separate LLC for each unique company.
Many business owners find it tempting to have multiple businesses under one umbrella. While some can pull it off, it is generally inadvisable. Here are a few points to keep in mind as you weigh all your options:
The ability to create individual LLCs
One person can create as many LLCs as he or she pleases. While creating a separate LLC for each company results in more paperwork, there are significant advantages to this strategy. For example, creating separate LLCs protects each of an entrepreneur’s businesses.
As an example, say a business owner established a successful restaurant. She now wants to expand into retail by creating a separate clothing store. Creating a different LLC for each would isolate each of those businesses’ assets. In the event that someone sued the restaurant, the clothing store would have protections.
Developing a holding company
Another option to consider is whether you want to create a holding company that serves as an umbrella for all your companies. A holding company is an enterprise with the sole purpose of overseeing other businesses.
This way of structuring also comes with some protections. First, any LLCs owned by the holding company have limited liability. Additionally, the holding company itself offers limited liability protection to the owner, so there are two layers for the entrepreneur to remain protected. Each way of structuring a business comes with its pros and cons, so you need to do what you believe is best for your company.