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.She also offers consulting services to business owners as they choose their M&A advisors.
- What is Exit Planning? - November 22, 2021
- Business Broker Fees and Other Business Sale Expenses - October 29, 2021
- EIDL Round 2 — SBA Expands Covid-19 Loans Again - September 21, 2021
Have a Question? Add it to the bottom of this post!
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 you’ve chosen in the state in which you choose. If you choose an LLC, you will need to draft an Operating Agreement. If you choose a Corporation, you will need to file Incorporation documents.
- 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.
- Check out our Startup Checklist for your new business to make certain you take all of the necessary steps.
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.
In part three in this series, you may explore alternatives to using a single business entity with multiple fictitious names (or DBAs).
Hello,
I am a physician who is now planning on working privatley for myself. I plan on working as a consultant at a med spa providing various services. I don’t plan on staying for more than 2 years, before going out on my own. The director will be taking a percentage of the profit I make. I will also be starting another business offering guided meditation classes/programs for individuals, detox programs, maybe coaching, and possibly do other types of events offering my services. First off, as a consultant do I have to form my own LLC prior to start working at the spa and second if I do, should I also open a different llc for the meditation business? Second question is how should I structure the businesses as an LLC or Corp? Thank you in advance!!! Also, when I decide to go out on my own apart from the spa, do I have to start another LLC or can I use the same one I started as a consultant? I will be Dr. Torres providing functional medicine services, etc. Sorry for the long question. Also, to start operating as an individual business do I have to have an llc right away or can I wait to do so?
There’s a group of 8 LLC businesses (different individuals) that would like to establish as one entity. Is it possible for the 8 LLCs to create one business?
Hi Cheryl,
Yes, this could be accomplished through a tax-free reorganization.
The LLCs could liquidate and then contribute the assets and liabilities associated with each LLC to a newly-formed business entity.
Doing this is tricky and not a DIY project. Especially when you’ve got eight parties involved!
Please consult with a Tax Attorney and CPA.
Hope this helps a bit…
I currently have a landscaping company and I am trying to start another one doing Surfaces restoration.
How do I put those 2 companies under one main umbrella?
I know I can just have 2 DBA under the main company, but,
Can I have 2 LLC’s under it instead?
and if so,
Do I need a specific EIN# for each?
Hi Celic,
If you want to have two, separate legal business entities — one for your existing landscaping business and another for your new surfaces restoration business, you don’t necessarily need an ‘umbrella company’ or what’s typically called a holding company. Unless you really want a third company to hold the two business entities. This would mean the holding company is owned by you and the two LLCs are owned by the holding company.
If this is what you want, ask yourself what’s the purpose of the holding company?
With that said, if you go forward with a holding company for your two LLCs, then you will need to file for an EIN for each company.
Your thoughts?
Am a hair salon owner, sole proprietor. I want to add printing logo tshirts, hats, decals, stickers…. Can I just added to my hair salon, sales and expenses for taxes. I want to file one tax return.
Estética
Hi Estetica,
Yes, if you want to include the income and expenses from your new print business, as a sole proprietor you (personally) would file for a fictitious name (DBA) for the new business and would file the taxes for your salon and printing business on Schedule C with your Federal 1040.
All the best…
We have a multi member LLC with one EIN# and 2 dba’s, with employees and contractors under each dba. I was told by the Dept of Revenue, that I can only file one form 941 for both payrolls. How do I handle the w2’s and 1099’s?
Dena:
ALL of your dba financial data should roll-up to a single entity, in this case, the MMLLC. The dba’s are NOT separate companies. Everything needs to be combined for all tax reporting purposes.
Internally, you can split out your finances for decision-making purposes, but externally, you have just ONE company.
I have a full time job that I get a W-2 for that I will still keep. I also started a job in May buying items for resell business that I get commission on and will receive a 1099 as a independent contractor. I also started a Amazon Merch (T-shirt) sales which is not doing good at all. I then started to be my own AZ seller which I definitely want to turn into a LLC. I am not sure what to do and I have thought of many scenarios. Do I make a LLC overall called My Business and then do a my business az sales, My Business Az T-shirts as DBAs. I then do not know where the contracting position fits in. Another questions is how to file taxes do you just put everything on 1 schedule C
Hi Brian,
At this point, you are an employee who will receive a W-2 and an Independent Contractor/Sole Proprietor and may received 1099s for either earning income or selling products.
You’ll file a 1040 with your W-2 and a single Schedule C which would include all of the income you earn as an IC and Sole Proprietor.
If you choose to form a business entity, then that entity will need its own EIN and would then file its tax returns according to the requirements of the entity you chose.
With that said, I’d ask yourself why is it necessary for you to file for a business entity at this point? If you do so, you will incur more work, responsibilities and costs.
On the other hand, if one of your side businesses were to grow to a significant business, then it may make sense to form an entity for it.
Hope this helps a bit…
I’m in Ca. I have an LLC that has two DBA’s under it. Both are in the fitness industry. For one of the business lines, we hold classes that have strict direction from the employer, so I know those people are considered employees, they get a W2. The other business is personal training, where the trainers are just renting space from me and operate as contractors. I have some employees from the first business that also work as trainers for the second business. Can I have the same person be an employee and a contractor under the LLC accounting?
Hi Shivali,
Regardless of the location of your business in the United States, whether you treat someone who is working for your business as an employee or as a contractor is dictated by IRS guidelines.
It may be possible that the same worker qualifies as both for your LLC.
That said, it’s really important to get this right because there are significant penalties if you do not do so!
All the best…
Hi, I am planning to open up a multiple business under one roof. What will be the best choice of business entity for me to choose? I do not want to have any issues on doing the DBA for a multiple business.
Hi Jun,
If you do not want to use fictitious names (DBAs), then your business entity choices include:
Corporation (S or C Corp)
LLC
Partnership.
The best choice for you will depend on what your objectives are, the types of business owners you intend to have and what type of business operation you intend to start.
I can’t tell you which is best for you.
Here’s where you may learn more about your business entity options.
All the best…
Hello, I have an e-commerce business in Colorado as a sole proprietor. If I want to open a new business as an LLC, can I add my existing business as a DBA to the LLC?
Miriam:
You are the boss of your business. You may include any legal business activity in your LLC. If you want to include any or all of the business you do as a sole prop, then you may do that.
I am in the process of starting a new business with a partner. We both work with billable clients in different roles, but are well synced in our jobs. We’d like to work under one business name but have our own LLC’s so we can each own our own portion of the business. Is this a good way to go about it? We would both share costs of rent, phone etc, but oversee our own collections and expenses.
Michelle:
Very often, in certain types of professional fields like medicine and law, the firm is the face of the business, but the professionals want control over their own income. There are several ways to accomplish this goal, including:
1) Creating a partnership of LLCs that pass revenue to the individual LLCs after deducting shared operating expenses; OR
2) Having a partnership or LLC that operates an office that gets paid rent by the owners as they get paid separately.
3) a Joint Venture (JV) where there is no operating entity, but rather an agreement to share expenses and/or revenue.
I would suggest that you tale to a tax advisor and an attorney to determine which business model is best for you and your friend.