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.
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).
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.
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We have an LLC in Las Vegas Nv. We are going to add an e-commerce business as a DBA. Would the DBA need a separate Sales Tax Permit, or would the DBA operate under the LLC permit? Thanks Much
I filed for a DBA with a company I want under my parent company. I generated a EIN for this company but I want it to be under one EIN which would be the parent companies. How do I cancel the DBA EIN and adopt the parent companies EIN to be over it?
Daniel: You cannot “nest” d/b/a’s or have one “under” another. A dba is simply another name. If you are running a sole proprietorship, all your dba’s are nothing but alternative names for Daniel Dixon. If you want to nest entities, you will need to create certain legal relationships using state-recognized entities such as LLCs or corporations. And Single Member LLCs are generally ignored for tax purposes, so you are back to reporting financials as one entity.
I would suggest discussing your goals with a tax advisor to get the results you are trying to achieve. Let me know if we can help!
I filed my actual business for my Llc as a Dba first will that hurt my business in the long run?
Bashana: Your DBA refers to Bashana as a sole proprietor. Your LLC is a separate “person” in the eyes of the law. I suggest you speak with your accountant on straightening this out. If you are the only member of your LLC, you will report its income as a separate Schedule C from your dba sole proprietorship which is also filed on a Schedule C when you file your taxes.
I am a sole member llc. I want to hire my wife to come work with me. She has health insurance through her former employer. We will lose that coverage in three months. Are Group Health Insurance plans cheaper or Family Plans? I would be paying for my wife, two kids and myself. I ran a quote the other day at $1,400. We are looking at HSA’s plans either way.
Do I receive any tax savings for pay all of the group premiums through the business?
Does it make sense to put her on payroll since we are married?
Does it make sense to put the kids on payroll, if so am I limited in what I can pay them and still claim as dependents?
Jeff: A single-member LLC is considered a sole proprietorship. A sole prop generally does not have the owner as an employee. Furthermore, most insurance companies look at a H&W as a single insured unit. I mean, you could buy two individual policies, but a family policy is still less expensive. So, as a sole prop, there is no apparent advantage to putting your wife on payroll as an employee for any reason. You can put your kids on payroll if they do some actual work, but it does nothing to make you eligible for group health insurance because they are also covered by mom & dad’s policy.
As a sole prop, any health insurance you pay for is counted as a deduction above-the-line on your personal tax return as long as the business shows a net profit on Schedule C.
If you convert your SMLLC to be taxed as an S-Corp, there are some other small advantages for tax purposes, but you are still in the same boat as far as health insurance–your family isn’t a “group”–it’s a family.
Hello, I have an LLC formed which I have used for several years for my real estate business as a licensed real estate agent. I am also a licensed life/health/annuity insurance agent. Can I register (2) two dba’s, one for the real estate business and the other for the life/health/annuity (will be adding property & casualty) business under the one LLC? At the present time I am the only agent for both businesses. Thank you in advance for your response.
RR:
Why, yes, you can register 2 (or more) d/b/a’s to a single LLC entity. But just because you can, doesn’t mean you should!
Keep in mind that if both businesses are under the same LLC umbrella, if a “storm” hits (i.e. a lawsuit), both businesses are going to get hit simultaneously and this may not be the liability protection you want.
Hello,
First, thank you for this post!
My Question: I will be starting two new businesses
1. Podcast
2. Online Business selling Services
These are doing two different types of businesses and with different focuses. Would I be correct in saying that I will register 2 different EINs under 1 singular S-Corp?
Hello, friend: You may only have ONE EIN per entity. An S-Corp is an entity. You could do multiple business activities under a single S-Corp (but because you could doesn’t mean your should).
Are these two businesses related? (i.e. the Podcast is used as a marketing tool to sell your services), or are these separate activities? If they are completed unrelated, you may want separate entities to minimize liabilities.
I’m planning on starting a coaching business in California this summer as a single owner (one-on-one coaching virtual and in-person, group coaching, speaking engagements, online courses, and the likes). I also plan on having DBA’s under the main business. I’m torn as to the best legal and tax structure. Should I go the LLC route or the S-Corp route? Or do I consider an LLC with an S Corp tax filing status? I know they both have various tax implications, but how do I know which one is best for the business? Any advice would be greatly appreciated and welcomed.
Lo: We’d love to coach you to coach better! Giving a quick answer to a complex business structure is no better than Googling for an answer. Blind advice is worth what you pay. There are near-term and long-term considerations for both Liability protection and Tax protection that don’t point to a quick answer based on a one-paragraph description of your situation. However, if you choose and decide a few years later that you chose incorrectly, you will spend a lot of time and money fixing the problem. For that reason, I strongly recommend that you speak with both an attorney and tax advisor about your goals BEFORE you setup your business in California. In CA, each entity you organize will cost you AT LEAST $800 minimum annual Franchise Tax, but sometimes you may find that the fee is insignificant relative to the benefits you get when set up optimally.
Hello,
I have a llc and one dba for my retail vape shop, let’s call it a vape goat (dba) for my first location. Now I am planning to open another vape store location soon, my question is can I use same name as my first dba vape goat. I know I can do multiple dba under that same llc but I would like to use the same trade name for my 2nd location. Do I need to register again and file pay for dba for the same name vape goat
Hi Asif,
Yes, if your LLC has the fictitious name (DBA) for vape goat, it’s possible to use it in other locations, albeit you may need to register the DBA in the new location’s fictitious name registration office if the other locations are not in the same jurisdiction as your LLC.
In certain areas of the country, a DBA is registered in with the local government (cities, towns, counties, etc.) and not with the State. In other areas, the DBAs are registered with the State. So, it’s important to understand where the DBA you’ve filed for will cover you.
And you always need to careful to be aware that your fictitious name (DBA) may violate another’s Intellectual Property rights if they’ve filed for registered trademark at the federal government level. In such a case, a DBA will not be possible without risking legal troubles.
All the best…
Can someone take 7 partnerships (all restaurants) that have the same 2 owners and consolidate them into 1 partnership (still 7 restaurants) without tax consequences?
Joanna: Most partnership mergers are tax-free transactions. But just like all advice on the internet, the devil is in the details and this advice MAY not pertain to your situation. Please consult YOUR tax advisor before jumping into a transaction because there may be specifics in these partnerships that has a material impact on your proposed merger.
Person A in NYS and Person B in VA each have a business. They want to purchase a training they would split the cost down the middle. Would they both be able to claim a business expense for half of the cost or could only one business claim the expense?
Shenelle: A deductible business expense is one that the business pays for and is “ordinary and necessary”. Training fits that requirement, so each business may deduct the portion that it pays.
I have a janitorial business that has been operating for 10 years.
I am working on getting my Facility Management Certification.
I want to bring my current janitorial business under the Facility Management business, but keep its name. What is the best way to proceed?
Carl: This is a question best suited to be answered by your attorney or tax advisor. Without adequate background information, I cannot determine what you are trying to accomplish or the best way to do it. You certainly may contact us if you would like a consultation.
My last financial planner set up several INCs and I have several LLC… I need to restructure, and dissolve some-but HOW??? 2. I have similar healthcare businesses but want to make sure each has its protections by keeping them separate. For example, when I am audited for one, Id like it not to cross over to the others. (Foot care business, homecare business, non medical home care, ceu provider) how do I keep them each safe from the other but still together?
Hi Nikko,
Having separate business entities is a powerful way to protect each business from the activities and potential lawsuits.
If you want to be certain one business audit doesn’t affect the other businesses you own, then you should be careful to not comingle the assets and liabilities and keep all income and expenses separate.
Unfortunately, you really can’t keep them together AND protect them from whatever happens to any single business.
All the best…
Nikko: If you have active businesses, I would recommend speaking to a tax advisor or attorney. A Financial Planner is not the right professional regarding these types of matters, even if you trust him for investment advice. If you don’t have a tax advisor, we’d be happy to provide a free initial assessment!
Does paying same legal entity employees from two different payroll vendors appropriate? For example, a business with 10 employees overall and two paid out of ADP with the rest paid out of Ceridian but both entities filing taxes for their respective groups of employees although under the same FEIN?
Hi Nellie,
I do not believe multiple form 941s will be accepted when you try to file. It’s likely you’ll receive a notice from the IRS.
All the best…
My husband and I created an LLC, let’s say ABC LLC, in TX and then registered our DBA as XYZ. Initially, we tried to create our LLC as XYZ but it was too similar a name as another company already registered in TX so we were denied. Our brand name, XYZ, is gaining popularity and I’m wondering if it would be a good idea to register XYZ in another state as an LLC instead of just a DBA. What are your thoughts?
Hi Trina,
I recommend that you verify the tradename you’ve assumed in your business, even if a DBA was applied for and granted, does not infringe on another party’s intellectual property rights.
There could be a business in New York (for example) that registered a Trademark with the USPTO that has the right to your brand name. Looking only at the state in which you formed and operate your business may not be sufficient.
Here’s another post on this topic which may be helpful to you.
And another post here.
All the best…
I have a client that owns and operates a bakery. They want to open a second shop this year and to keep separate records. Upon filing next year is it still all filed together as one K-1, the two stores together? Or two separate returns with two K-1’s, one for each location?
Susie: K-1’s are not issued “per location”. A K-1 form is issued 1 to an owner for each entity they own. If this is a single S-corporation or a single partnership, then all locations will have combined financials for tax purposes.
I have a distillery the LLC and TTB permit that is an entity that basically points to me only. My business is going to be called X and my two brands will be Y & Z can I structure this way and use the TTB Permit?
Jack:
Similar to my answer above, A permit or license cannot be issue to a brand. A permit, license, or even a bank account can only be issued to a PERSON, or an ENTITY which is recognized as a “legal person” in the eyes of the State. An LLC is such a recognized entity, the rights to exist which are created by your state.
Your LLC can NOT use a license or permit that is issued to you, Jack. You and your LLC are two different “people”. If you market alcohol brands Y and Z under your existing permit issued to JACK, the person, then ALL OF YOUR SALES of Y and Z will not be protected by your LLC and you will have no protection from creditors. Furthermore, you will have to report all income from the sale of Y and Z on your personal tax return as a sole proprietor. This may not be in your best financial interests at all.
I can’t tell you how many people make the mistake of thinking that their LLC and them individually are one-in-the-same. They are NOT.
I have an online service business. (C-corp)
I have one website on right now. I would like to build a new website and start the same business but with a different name (for ex website – abc.com and xyx.com and company name – business Inc)
Can I put both websites under the same company? or do I have to open a new company?
If I keep the same company, do I have to register for 2 DBAs? What do I have to do to keep both websites under the same company?
Also, can I keep only one bank account for both websites?
Thank you
Ron:
Websites are not legal entities. Your C-Corp IS a legal entity, meaning the state recognizes it as a separate “person”. You are limited to 43,544,542 websites per corporation. (OK, not really). There actually is NO upper limit. You can have as many as you want. Think about a company like Microsoft. How many different web addresses and websites do they own? Probably thousands! Do not be confused.
A website or even a web address DOES NOT EQUAL a business.
A website is a non-tangible asset of a business.
Websites cannot own bank accounts. Only people and state-recognized entities can have a bank account. Is there a limit to how many they have? Of course not.
I advise you to talk with a tax advisor or CPA soon about the differences in accounting and business types and how to integrate your many business ideas into a cohesive plan.