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.
I currently am sole owner of an S Corp servicing commercial customers and I have all proper insurance. I would need different type of insurance to branch into residential. Instead of opening another corp, can I have a residential division with its own policy? Can that be done as DBA?
Hi, John.
You have a question as to whether your business can be divided and hold separate insurance policies. I admit that I am not an insurance expert, but generally speaking, an insurance policy is written for the benefit of an “insured”. The insured is a named individual or entity. Your business cannot be two separate entities. A “d/b/a” or “doing business as” name is simply an assumed name for a legal entity. It does not divide your business into separate entities.
As for the insurance company, they are likely to look at the whole entity, not just part of it. Therefore, this idea of having a separate “division” which is legally the same company as the other “division” will not be sufficient.
A separate entity is created for both LEGAL and TAX protection. Your question covers the Legal realm. Separating a single business into “divisions” by simply giving the divisions separate names is not sufficient to protect you.
The solution is to have separate legal entities. A second S-Corp can be created for your residential business. It could have a similar, but not exact, legal name as the commercial entity.
ANY entity can have a d/b/a or assumed name associated with it.
Star Residential Plumbing could be your d/b/a for Star Home, Inc.
Star Commercial Plumbing could be your d/b/a for Star Industrial, Inc.
By separating your businesses, you have an additional layer of legal protection. If your commercial client sues you for an error, your residential business is not at risk and vice versa.
Insurance simply helps offset the potential costs of those risks. But the insurance company covers all risks of the full legal entity. It would be difficult in some cases to differentiate “commercial” from “residential”…imagine a business run out of a home! Is it commercial or residential?
I am starting an LLC and two of other people I will be working with will also start their own LLC. 3 separate LLC’s and we want to have one DBA for website etc that we all use. So it appears like we are one practice. Is this possible and if not what can we do. We see many mental health private practice LLC’s that practice this way.
Hi Amy,
You may find other practices setting up a group of practitioners in this way. It’s important to understand that the mechanics are important!
Multiple LLCs cannot file for the same DBA, which is what you’ve described.
My guess is that the LLCs own part of another business entity, which allows them to market under the single brand. This takes a good bit of legal work to do and it means essentially you are sharing a business with someone else. That may not be what you desire to do.
It could also be set up by establishing a single business entity that owns the brand and that branding is licensed to others (such as the LLCs for each of the practitioners.)
Let us know the state in which your business is located and we may be able to assist you further.
All the best to you Amy…
I started an LLC for my handmade craft business but i also want to start a webstite/blog under a DBA. I cant decide which naics code to enter. Is it 519130 for the website/blog? I want to sell my products on the website, but mostly make money using ads, how to courses, and affiliate links on there. Also, is my LLC the registered agent for my DBA or am I?
I am trying to figure out the best way to start my business. I want to provide multiple services such as Insurance, Car Titling, Money transfers, Notary. If I start the LLC process how do I go about disclosing the rest??
Hi Yara,
I am sorry, I don’t understand what you mean when you say “disclosing the rest”. To whom would you be disclosing something?
Hi Rebecca,
Your LLC’s NAICS Code should be what’s most closely defined for the business which you derive the most income from.
If the LLC has registered the fictitious name (DBA), then it should be identified as the registering agent.
All the best…
Holly,
Is it possible to have a equity partner in your DBA but not in your S-corp?
Hi Vaughn,
No, it is not possible because a DBA is a fictitious name for the business (or individual) and it’s not a separate, legal entity.
Here’s another post on this topic which may help you a bit further.
All the best…
I have started an S-Corp with my partner and we have opened a business checking account. The S-Corp has ownership in an LLC for which a product creates revenue for the LLC. The idea is to duplicate this process each time this product is started in a new location with a new LLC. I understand when the yearly disbursements are given it all funnels up to the S-Corp before disbursed between my partner and I. My question is do I need a separate set of books and checking account for each entity to keep everything as clean as possible.
Hi,
Is it possible to have two different DBA’s registered under one LLC, where one DBA is a service consulting business and the other DBA is a product business reselling products on Ebay? The consulting and online reseller are two completely different businesses. Trying to avoid forming a new LLC for reselling business
Hi Bill,
Yes, this may be possible as long as your LLC’s Operating Agreement indicates these two lines of business are permitted and there are no licensing restrictions for the services (consulting) you want to provide.
Is some circumstances, certain professional services may not be co-mingled or operated as part of another business. This is especially true in the healthcare services industry.
Hope this helps a bit…
I have a DBA under my LLC. Can I accept payments for my services under the DBA or does it have to be under the LLC?
Hi Trina,
Yes, you may accept payments from your clients payable to your fictitious name (DBA).
To do so, you will need to open a bank account in the DBA’s name and will need to provide the bank with proof that your LLC has properly filed for the fictitious name.
All the best…
I am looking to open a Indian restaurant with a partner. The landlord is not willing to agree doing lease contract as LLC with separate entity assumption states that the transactions conducted by a business are separate to those conducted by its owners. The landlord wants me to sign the 10 year contract with personal gareentee is this mean I am responsible for that lease for 10 years!! And landlord has the right to come after my personal assets. Will I be safe doing lease with this landlord or any landlord as xyz LLC as seprate entity if things go south after few years. I’m not forced to pay for the lease for 10 years!!
Hi Zachary,
The landlord knows that your LLC would provide you with certain liability protections, including completion of the terms of the lease.
It’s for this reason, he is asking you to personally execute and personally guarantee the lease.
Although you did not ask, I’d like to share one other thought you may want to consider… a 10 year lease term is a very long time, especially when your business is a startup.
Until your restaurant is well-established, you may want to consider finding a lease with a shorter term. Something like three years with options to renew.
All the best with your startup Zachary!
I’m looking to form two separate LLCs as I grow my two separate streams of income. I’m currently operating as a sole proprietor and work from home. My question is concerning bookkeeping going forward, how should I split expenses for the two LLCs? This is for expenses such as software or use of cell phone that is shared. Do I just divide in the middle and keep records that way?
Hi Doreca,
You could choose to split the expenses 50/50 as you suggested.
Alternatively, you could split them according to the relative gross income of each business.
Either way, as long as you split the expenses in a consistent manner year-to-year, you should be okay.
All the best…
If me and a friend share a building and have the same business name. One will be a boutique and the other girl will be fixing hair. What type of corp. do we need to establish? Each of us will be filing separate.
Hi Laura,
The type of business entity you and your friend choose to form depends on many factors. I am sorry to say, it’s not a one-size fits all scenario.
Here’s another post on the topic of business entities, which may be helpful to you.
If you want to file separate tax returns for your respective businesses, you should not form a business entity together.
Hope this helps a bit…
I have an S-Corp to import wines. I am also getting in the restaurant business. I would like to create an LLC for the restaurant under the S-Corp. Will that open my S-Corp to any kind of liability that the LLC may get into or will both companies be protected from each other?
Hi Sheilah,
Any time you have ownership ties between business entities, there is a link which may be enough reason for someone to sue both entities.
If there is not a compelling reason to have one business owning the other, you may want to reconsider.
All the best…
Hi there,
Is it possible to have 2 separate corporations with dbas that are similar to each other?
Hi Karen,
Yes, as long as the state or governing body approves your fictitious names.
It may not do so if another business entity or individual has previously filed for the name.
All the best…
Hello
I originally have a S- corporation in the state of NH and I opened a foreign corporation in the state of MA. Do I need a separate tax ID and NPI number for the foreign corporation in MA. Thanks!!!
Hi Wish,
The foreign corp registered in another state does not need a separate EIN (Employer Identification Number). The operation in the foreign state is part of the S Corp you’ve formed in New Hampshire.
As for the NPI, I don’t know. The National Provider ID is required for healthcare providers, which is not related to the business entities or taxation topics.
I am sorry we can’t help you with that one!
All the best…
We have an existing S corporations single unit rental and have an EIN. W now have another house we’d lie to rent. Do we have to file a separate form for this unit or just keep separate records and file it with out taxes at the end of the year? No one seems to be able to answer that. Ive contacted the Michigan.gov and they said go see a lawyer. I talked to the lawyer and they said see your CPA. She siad get an EIN and when I read through all of that, it came down to don’t get another if you have one. How do I umbrella this property?
Hi Sandra,
If you intend to title the new house you intend to include in the S Corp, then it will be an asset of the S Corp. If this is the case, all income and expenses will be reported on the S Corp’s tax return and you’d use the existing S Corp’s EIN for the new house. It is best practice to keep separate records for each rental unit you own (or the S Corp owns).
You would only need to file for a new EIN for the new house if you wanted to have it owned by another business entity or an individual.
Hope that helps a bit…
I have a LLC for a thrift store and wanting to start an Italian ice push cart business. Do i need a new LLC or can it be a DBA, if the line of work is different although both are reselling? Will I also need two different EIN#s if I go the DBA way?
Hi Kizzie,
Your LLC could apply for a fictitious name for the new line of business if its Operating Agreement permits conducting such a business.
You also may want to consider the fact that by doing so your two businesses are in a single business entity.
This scenario presents risks should something go wrong with one of the businesses. In such case, the other business would be in jeopardy.
If you choose to have your existing LLC file for a DBA, then you would not need another EIN. The LLC’s EIN would be used for both lines of business because they are part on the same LLC.
Hope this helps a bit…
I have a sole member LLC and am starting a new completely different type of business with a family member that will be a partnership. Can I make the new company a DBA under the LLC, or would I need to create an LLC for this new business.
Hi DM,
If your LLC files for a fictitious name (DBA) for the new line of business you desire to share with a member of your family, your existing single-member LLC would be taxed as a partnership and all of the business associated with your existing business would also be shared with the family member too! You’d have to change the LLC’s Operating Agreement to accomplish this. I don’t think that is your intention, given how you asked the question.
If you want the family member to share in ONLY the new business, then you will need to form a partnership, an LLC or a corporation.
Hope this clarifies things a bit for you…
I currently work for a mid-to-large size, non-public company and I have been working on a project that may turn into a stand-alone project or entity, as my company was interested in filing for a patent (which it has) but not really taking the idea any further. I have been trying to understand what the options are for my team to raise VC money and continue developing this into a viable business. Is the only solution to leave the current company and go out on our own? Is there a model where the company stays involved? We plan on consulting an attorney, but I really wanted to understand all the possible scenarios. Any input is greatly appreciated! Thank you!
Hi Sarah,
Sounds very exciting! Congratulations on your part in the development of this product.
Consulting an Attorney is wise as you may inadvertently step into trouble without proper legal counsel.
Here are a few thoughts for you to consider:
1. As an employee, you and the other employees on your team may have agreed in writing through your employment agreement that any IP you develop while employed by the company belongs to the company.
Such clauses are common in employment agreements and employee handbooks. If this is the case, you and your team members have no legal rights to the products you’ve developed. Striking out on your own to commercialize this product may result in a lawsuit and that’s never good!
2. If your employer owns the IP, which is very likely the case, you may want to consider approaching them with a proposal for you (or your company) to license this IP from them on an exclusive basis for a specified period of time. This would allow you and your team to determine if the product is a viable commercial product and if so, your employer would benefit financially too.
3. Given the fact that your employer filed for a patent on the product, it’s likely your employer feels the product has potential to be commercialized, so I recommend you proceed with caution.
Hope all works out for you and your team as well as your employer!
All the best…
What would my company be considered if I do home renovations, stock, and real estate investing, along with ecommerce, a call center, and different franchises
Hi Andrew,
The short answer is complicated! LOL
That’s a lot of moving parts for one business owner and generally speaking I don’t recommend it.
To obtain general liability insurance for a single business with those varied types of business risks would be difficult, if not impossible.
And I doubt you’d really want to expose the liabilities associated with doing home renovations with the stocks and real estate holdings portfolio by having these businesses all under one business entity.
Breaking them up into multiple business entities will offer you valuable protections.
All the best to you Andrew…
If my corporation is called xyz sportswear could I have a dba called xyz trucking under that corporation?
Or does the corporation and dba have to be in the same line of work
Hi Shaya,
It’s possible for a corporation to have many different lines of business IF it’s stated so in the Corporate Bylaws.
All the best…