In part one of this series, we discussed the various options to incorporate multiple businesses while keeping each business as a separate entity. It’s worth noting that having a separate legal business entities can be costly when it’s time to file your taxes as most CPAs charge an additional fee to file each business entity’s tax returns.
Additionally, you may want to develop a line of businesses that are closely related in terms of the products and services offered, the industry, or even its customers. In such a case, it may make good sense to create a single brand that will unify the various business operations. Marketing can be simplified under this type of multiple business structure and the businesses could flourish under a unified brand.
If you find your future plans include the addition of similar lines of business to your existing business (or the business entity you are about to form), there may be a simple way to structure multiple business entities which could reduce tax filing costs and administrative time in the future.
How to Structure Multiple Businesses Under a Single Business Entity
- First determine which type of business entity you’d like to form:
a. Limited Liability Company; or
b. Corporation (an S or C Corporation); or
c. Partnership. - Determine if the business trade name you’d like to use is available in the state in which you choose to form a business entity.
- If it is available, determine if the trade name has been federally trademarked by another party. If so, go back to the drawing board!
- If it is available for your federal trademark registration, consider filing for it after you launch your business.
- Form the business entity in the state in which you choose.
- File all of the necessary start-up documents and public notices with your state and local government (if applicable).
- File for a Federal Employer Identification Number (EIN) for the business entity.
- Make any federal tax elections necessary.
- Under the business entity, apply for a fictitious name for any other lines of business you’d like to operate under the umbrella of the business entity you’ve formed.
Example of Multiple Business Structure Under a Single Business Entity
If you have a business that manufactures shoes in New York called ‘Soho Shoes, Inc.’ and you’d like to offer speaking engagements to shoe designers under the trade name Soho Shoes Speaks and start a blog about the life of a shoe designer at SohoShoesMusings.com, you could hold all these lines of business under one company.
To do so, the incorporated business known as Soho Shoes, Inc. would apply for two fictitious names (or DBAs) — one for Soho Shoes Speaks (for speaking engagements) and another for Soho Shoes Musings (for the blog).
It’s important to note that before your business files for a DBA or Fictitious Name, you should verify that your use of the name does not violate another party’s intellectual property rights. You don’t want to get into trouble and have to start over again after your start marketing your products and services to potential customers.
This multi-business structure example is really one business entity with three different marketing or trade names. So, it’s relatively easy to co-market the related lines of business while minimizing the tax reporting requirements. In my book, this structure saves time and money and that is always good!
What Does Filing a Fictitious Name Mean?
When your LLC, Corporation or Partnership has filed for a fictitious name, the state has given permission to the business to use a trade name for marketing purposes which differs from the business entity’s legal, or official name. It’s really that simple.
The fictitious name certificate does not create a separate business entity so the line of business operating under a DBA is part of the business entity which filed for the DBA.
You will not be able to sell member shares in the LLC, stock in the Corporation, or partnership rights in the Partnership for one of the lines of business which operates under the fictitious name.
And if you choose to sell one of the lines of business operating under the fictitious name, you will have to sell under an asset sale agreement as only part of the business entity will be transferred to the buyer. This can be tricky to do if the accounting books and records for the multiple lines of business have not been kept separately. So, seriously consider keeping separate banking and accounting records for each line of business under this multiple business structure if you think you may sell your business in the future.
Understand how to structure multiple businesses under one LLC or Corporation that serves as an umbrella.
In part three in this series, you may explore alternatives to using a single business entity with multiple fictitious names (or DBAs).
Holly Magister, CPA, CFP
Holly also founded ExitPromise.com and to date has answered more than 2,000 questions asked by business owners about starting, growing and selling a business.
So my sister and I have been wanting to go into business together for awhile and I think we finally found the ideal business for us both. First this will be a side business and then a retirement business so we still work full time.
That being said my sister joined Creative Memories – a scrapbooking company. She is creating a Physical scrapbooking businesses using Creative Memories as essentially one of her vendors.
I have moved on to Digital Scrapbooking which is a whole different business.
We want to run events together etc. Not sure if its best to work it as two separate businesses
Swanky Scrappers and Swanky Scrappers Digital.
Hi Joanna,
Couple of thoughts for you and your sister…
Firstly, hanging onto your day job is always best when you start a business until the cash flow from your business will carry you.
Second, I am not a big fan of joining forces to start a business with another person (even if and especially when it involves family members) UNLESS there is a compelling reason to do so.
I am not convinced you have a compelling reason to create a single business for you and your sister to share.
There is no reason you and your sister can’t work together by running events while owning and operating your own two separate businesses.
For what it’s worth, those are my thoughts for you.
All the best…
If a DBA that is under an LLC wants to operate with the acronym, ie. ABC for Alpha Beta Charlie, does it has to file 2 fictitious names?
Hi Alexa,
If the LLC is using a trade name which differs from its official, legal name, then the LLC should apply for a fictitious name.
There is no way for a DBA (fictitious name) being used by an LLC to apply for another fictitious name. Only the LLC could do so.
Here’s another post about fictitious names that may be helpful to you Alexa…
All the best…
I am sole proprietor of a shop offering products and services. I remarried after being widowed. My husband is opening a small service business to my clientele. He wants to run the service through my business and my business will handle all the finances, income and expense. Is it necessary to file a Dba for this business? He has given it a separate name, but will not have a bank account or take payments under this name.
Hi Linda,
Yes, if your husband is using a name which differs from his name for his business, then he is required to file for a fictitious name. This income will be associated with his social security number and should be reported on his Schedule C.
If you desire the income, expenses and all liabilities to be yours, then you should file for the fictitious name and report the income on your personal tax return (schedule C).
You can’t create a fictitious name (DBA) for a fictitious name.
All the best…
Reading different Q&A I’ve decited to present you my senerio. Im a contractor starting a business and at the same time planing ahead to expand later into different branches. Ive got a name ive want to use and want to add other names to it. Example Company (X) and planing to have (X) HVAC, (X) Electrical, (X) Plumbing, (X) Construction. I was wanting to have company (X) registered and do DBA for the rest of them for eaiser manigment. Ive got a llc now. Will a inc be better and what type. Im wanting to keep banks seperate for manigment but also think it would be better to have seperate liabilites. Considering employees, tools, licenses whats better. Considering licenses by our state (NC), only the company holding the license and their employees are allowed to do any contracting work, unless a subcontractoes files as an laborer, does not require any license.
Whats are some ideas on forming the company/s.
Have company (X) wth licenses. Tools, and employees and have seperate entities register and Using/Rent/Employ company (X) for all work done?
Hi Leo,
Well, you’ve asked a few questions here and without knowing your personal situation, the decision to form an LLC vs. a corporation is not a simple one.
We’ve got a post that covers business entities in great detail here that should be helpful to you.
All the best…
We have a non-profit 501(C)(6) with several small chapters, but we file taxes under one tax ID number. A few of our chapters feel that they own the funds that are coming into their chapter and do not consider them as belonging to the whole. How should we address this?
Hi Teresa,
You are correct in taking the position that the funds your non-profit has received, regardless of the chapter it was sourced from, belong to the non-profit organization.
If the funds were designated by your non-profit’s board for a certain purpose, then there may be a restriction on what the funds could be used for. That’s something you should discuss with your attorney while reviewing your organization’s bylaws on this matter.
Hope that at least gives you a place to start as you try to resolve the conflict Teresa!
All the best…
Hello,
Thank you for the info. Just wanted to reach out and clarify something in case I missed it.
I have a business name called BUSINESS A, LLC. and filed 2 DBAs called BUSINESS B, LLC. & BUSINESS C, LLC. under the BUSINESS A, LLC.
Q1: If BUSINESS A, LLC. is an LLC does that mean technically BUSINESS B & C are an LLC.
Q2: If someone sues BUSINESS B which is a DBA of BUSINESS A, LLC. does that mean they can sue BUSINESS C because everything is under BUSINESS A, LLC.
The fear is if one business is more successful and I get sued they can come after everything BUSINESS A, LLC. owns.
Thank you so much for your response
Hi Mike,
Your concern is valid. As long as you’re operating your business’s B and C as fictitious name (or DBAs) under the Business A, LLC, then these two lines of business are part of the LLC and would be subject to lawsuits and/or claims if anything goes wrong in Business A, B or C.
All the best…
Hi first off thank you for this valuable info you are giving out.
My personal question is if i have a DBA as ABC and wasd doing business one thing. Then stopped but kept the DBA. Can i start doing business offering different services under my original DBA? Can one DBA offer multiple services? Thank you Holly.
Hi Gung,
It sounds to me that you filed as an individual for a fictitious name (aka DBA) that you no longer want to use. Instead you’d like to offer a new service as a sole proprietor.
If this is the case, you may want to simply file for another fictitious name so there is no confusion about your business offerings.
As an individual, you may have multiple DBAs.
Hope this helps…
Hello, I would like to re-open my clothing store. But i want to open a shoe/accessories store also. I would like to open them with different names under a DBA example. ABC CLOTHING, DEF ACCESSORIES UNDER 123 FASHION ENTERPRISE, INC. What’s the best way to do this and would/should it be a S or C corp>
Hi Sue,
If you want your 123 Fashion Enterprise, Inc. (a business entity formed as a corporation) to have two lines of business — each with their own trade names, then 123 Fashion Enterprise, Inc. would file two separate applications for fictitious names (or DBAs) in the state in which the corporation is formed.
The corporation may also need to file for the same fictitious name in the county or local town. Every state, county and/or town has its own rules on this matter.
As to whether your corporation elects Subchapter S tax status depends on many factors. There is no ‘one-size, fits all’ answer to your question. I am sorry.
All the best…
Hi Holly,
I’m actually thinking of opening a new business but i’m having trouble with how i can do two different types of business under one corporation. i wanted to do a travel agency business and also a side business of clothes, jewellery and shoes. so i wanted to know if its possible to make a basic name for a corporation and do different DBAs for these two businesses.
thank you,
Hi Aima,
Yes, it is possible to form a single corporation and then file for multiple fictitious names (or DBAs) for the two lines of business or business operations.
Doing so adds additional risk should one of the operations be sued. Both operations would be part of the same business entity (the corporation) and subjected to the lawsuit. Think through that carefully.
Here’s another post that may be helpful to you.
All the best…
Hi Holly! My wife and I own a janitorial company in Virginia, but we want to start up in Texas also. Should I file a foreign entity to do business in Texas or should I start a whole new business in Texas under a different name? We would also like to offer our services at some point in some other states as well. Thanks for the advice in advance.
Hi Ron,
The decision to form a separate business entity in Texas for your new location should be based on whether you and your wife want to place some liability/risks separation between your existing business in Virginia and the new location. If that’s important to you, then forming a new business entity will be helpful.
If you choose to do so, you don’t necessarily need to use a different trade name in each new state. You could adopt the same trade name for the new locations under a fictitious name certificate filing. With that all said, be certain the trade name you are using (or choose to adopt) does not violate another party’s intellectual property rights so you don’t get into a messy situation.
Hopefully this will assist a bit as you and your wife take the next steps.
Be certain to consult with your attorney before you make any decisions. If you need assistance with that, feel free to request further help here.
All the best…
Hi Holly, my father and i own a small business, selling window treatments(shutters, blinds, shades). We also have an upholstery shop. I would like separate the two revenue streams(windows vs Upholstery) so we have a better view of our finances. Would adding a fictitious name/DBA be the best option for us? keeping accounting and accounts separate? Thanks so much!
Hi Jason,
I always advocate for keeping the banking and accounting records separate when a single business has multiple lines of business (or revenue streams). Especially if they are significant in amount.
Doing so will allow you to understand the profitability (or lack thereof) of each line of business.
This will help you make better decisions about your business and also be very helpful should you ever decide to sell one or both businesses.
As for adding a DBA, that’s very important to do properly if your business is using a trade name which differs from its official, legal business name. Here’s another post on that topic which may be helpful to you and your father.
All the best Jason…
I have 4 rental property. Condo in Texas, duplex in Montana and a house and duplex in Idaho. Should I do 4 LLC’s or one LLC to cover the 4.
Hi Phil,
Generally speaking, the owner of most rental real estate businesses with multiple properties, establishes multiple LLCs, corporations or partnerships to segregate liability exposure.
Given the fact that your properties are located in different states is an important factor to consider as well as the state(s) in which you form the business entities.
If you’d like to consult with an attorney on this, feel free to request assistance here.
All the best…
If I file a DBA for a second brand I am bringing on under my current LLC and keep separate books will each company be protected individually or do I need to create two separate LLCs and keep them separate? Since they are so similar in product, process and risk can I get one insurance policy and still protect them separately? One problem I am unsure about is both businesses are very similar in product but are manufactured in the same building but run under two different brand names and I would like to keep them as separate brands. How do I protect the two entities if a lawsuit was to arise?
Hi Mike,
If you desire to have certain liability protections for each line of business (your existing LLC and the new brand), you will need to form a separate business entity (LLC, Corporation or Partnership) for the new brand.
Filing for a fictitious name only allows your existing LLC to market a product under a name which differs from the LLC’s official, legal name. This scenario offers your LLC no liability protection if something goes wrong with either line of business.
Hope this helps a bit Mike…
Thanks! OK, That makes sense. Question, If both brands(LLC.s)are being produced in the same building with most of the same equipment and employees are they co-mingling? I really want to protect each LLC. if there ever was a lawsuit or something.
I could split the lease between companies as well as the payroll to keep the books and account transactions separate. Let’s say, If the lease were $1000, each LLC pays $500 to lease through its own account and enters a journal entry as $500 lease payment in its own books? Same with payroll. What are your thoughts on this? Would this be the correct way to go about this since the account is still making separate transactions for their own use? I want to keep the two separate and protect each individually but because they are so similar in equipment used and manufacturing process I didn’t want to lease a second building, buy new equipment and hire new employees for the second brand that can easily be produced in the same shop with the equipment I currently have. Thank you
Hi Mike,
You may want to consider forming a separate management company for the purpose of handling the employees, building and equipment sharing arrangements.
The management company would employ the people for both LLCs and lease the equipment and facilities to the two LLCs.
This sort of set up should be documented with a management agreement between all parties and should be drafted by a business attorney who’d be well-versed in your business activities and the laws in your state!
In other words, this is not a DIY project! 🙂
As for the record keeping in the accounting records and banking, all should be recorded as in an arms-length manner, consistent with the way in which your management company’s agreements with the LLCs are drafted.
And of course, the insurance on the businesses should cover the buildings, equipment and employees for the management company.
Hope this suggestion is helpful to you…
Hi, I am from California a friend of mine has three bay automotive shop at the corner of busy street and in most business area. I like to put up a wall and turn one of his bay into one of my smog star testing only. He mention something about the business is in a grand location, and the city will not approve a permit. But I’m seeing other business doing exactly what I intent to do. What are my option or he might be right.
Hi Sam,
The only way to know if it’s possible for you to add your business to your friend’s commercial location would be to investigate the local occupancy ordinances.
Such information should be available to you if you ask the city for it.
All the best…
I have three existing companies which I would like to bring in under one name or brand. Can I do so and still have each of the companies maintain their current corporate and tax filing status?
Hi John,
Yes, you could do this by forming another business entity that would create the brand and then license the brand to your three existing companies.
This new company would own the rights to the brand name, logo, tagline, marketing materials, etc.
Alternatively, you as an individual could create the branding intellectual property and license it to your existing (and future) companies.
Creating the licensing agreement should be handled by an Attorney well-versed in IP rights. If you need to speak to one, here’s where you may request help.
All the best to you John…
Hi Holly,
My brother has an LLC doing trim carpentry and now wants to start a landscaping business as well. Will a DBA work for us or because of general liability and work comp, will we need to start a new LLC for the landscaping business? thank you!
Hi Stephanie,
Whether you’re able to insure the two lines of business under a single general liability policy will depend on how your insurance carrier’s underwriter views these two types of risks.
Please ask your insurance agent his/her opinion on this matter before you make a decision.
As for Worker’s Compensation coverage, every state has its own rules… similar to the insurance carriers. A good insurance agent should be able to assist you.
There are other types of risks beyond those you can shift to an insurance policy when deciding to file for a fictitious name instead of forming a separate business entity. I’ve linked out to another post that may be helpful to you.
All the best to you and your brother…