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.
Latest posts by Holly Magister, CPA, CFP
- Understanding the Business Buyer Types When Selling Your Business - April 12, 2019
- How to Prepare and Include the Business Owner’s Family in the Exit Planning Process - March 14, 2019
- How to Prepare for Due Diligence When Selling a Business - February 12, 2019
I have an S-corp that provides web design, technical consulting, as well as tech investing. Sounds more glamorous than it is, but it has worked well as a structure for past 7 years. Last year I hired my wife in a small capacity to help the business admin side of things as a CA employee. This year I’m thinking of increasing the consulting aspects and offering social work and therapy, which my wife does currently. I’d like to set it up as an LLC and redirect her income to the LLC and then hire her on that side of the business.
Given these services are highly different is this something i can do with a DBA LLC? Do I need to adjust anything on my current S-Corp (like create a new LLC to manage that work)? I think above you commented that it’s not necessary to create a new LLC… The other consideration is liability as she has greater exposure working in healthcare related field.
The other option is my wife incorpartes herself into an S-Corp but it doesn’t seem like it’s worth managing two companies when there can be just one umbrella. As I know I’d have to manage all the business/paperwork/etc aspects anyway.
Thanks for having this site.
Hi Ben,
We’re glad you find this site helpful and happy to offer you some additional things to consider.
You asked a question about setting up a “DBA LLC”. Such structure does not exist.
Here is where you may read about the differences between an DBA and an LLC which may be helpful to you.
You are wise to carefully consider the differing liabilities associated with your collective business operations. It may not even be possible to offer social work and/or therapy in the state in which you operate your business when it’s co-mingled with another type of business. Your spouse’s professional licensing and/or professional liability insurance may prohibit doing so.
I completely understand your reluctance to manage two companies. That said, you may not have a choice and also may find the legal separation to be best for you and your spouse in the long run.
All the best…
Thank you so much for providing this service.
I have a “dormant” TX LLC with $0 receipts over the past few years, and I am sole member. I may begin a venture (not related to the original LLC filing) with a partner(s). Could I even begin a DBA under that old LLC and include the new partner/member there? -or is it advisable or necessary to just begin the new venture in a brand-new LLC with all partners and operating agreement, etc. listed and recorded there? Even if the partner were to be okay with running the venture under my LLC, I’m thinking all partners/members should be “on the hook” and listed properly – and not just me.
Thank you for your help!
Hi Jim,
I wholeheartedly agree, all of your business partners should be ‘on the hook’ by being recognized as members of your LLC.
You may be able to change your LLC’s official name, add the new members and then change it’s operating agreement to reflect your new business operations and members.
This is not something I recommend you attempt to do on your own.
If you would like to be introduced to an Attorney who can assist you with this, we are happy to help. Here’s where you may send in your request.
I would like to know more about the possibility of adding additional member to my business
Hi Lemuel,
Adding new members to an LLC will require you to amend your LLC’s Operating Agreement.
Identification of the members’ role — whether he or she is a managing member or not is important, among other matters.
Your LLC’s Operating Agreement is a vital document as you grow your business and will be very important when you sell your business. So it’s worthwhile to take the time to draw up a well-thought out Operating Agreement for your business.
All the best…
I currently have a makeup business which is an LLC, I would like to create a non-profit under this same umbrella, should I create a whole new business filing or can I relate to my current one?
Hi Athena,
You are not able to have a for-profit entity or an individual be the owner of a non-profit entity.
Non-profits do not have owners. Instead, their existence is for the benefit of the public or a specific group of people.
So what you are proposing to do is not possible.
Instead, you could form a separate corporation and then file for the non-profit status with the IRS.
All the best…
Hi,
I have three restaurants with separate LLC’s. I would like to create a management company (additional LLC) as an umbrella to handle certain aspects of the operations of each. The ownership equity in each restaurant is different. The Management Company would be owned by some of these equity partners. What advice can you recommend?
With kind appreciation,
John Freer
Hi John,
The structure you are considering is not unusual when you have a situation such as yours where several partners own some of the operating businesses.
At a minimum, you should develop written management agreements between the management company and each restaurant to cover all aspects of its relationship.
Additionally, it’s wise to obtain business liability insurance coverage for each operating business and the management company too.
Hiring an attorney who is knowledgeable about how to protect the businesses individually and the owners would be advisable. We are happy to introduce you to such counsel if you’d like to let us know more about your situation and needs here.
All the best…
Hi,
Thanks for this helpful info you provided above.
My question that i hope you can answer is:
I have a LLC that was created aprox 5 years ago and never did anything with it. Filed taxes the first year based on zero revenue and zero expenses, then did not file anything since i though it makes no sense. The LLC is still active but no business is conducted. My question: should i file taxes on it now(not sure if makes sense), should I close/terminate the business or since I am planning to start a business now(with different name), should I file for a DBA under the LLC from 5 years ago. Most economical approach is most desired 🙂
thanks for your help.
Hi Andrew,
Economical in this case might not be “optimal”. If the LLC is not appropriately dissolved, it could be liable for debts or other matters that could impact you personally.
If you conducted no business, I assume you’d have no taxes to file. And the LLC does not file separate taxes–so unless you plan to file amended returns, it would be a bit foolhardy to file.
If you can use use the existing LLC and use a DBA, you’d have an entity with a trackrecord…
This is not legal advice and should not be taken as such.
Kwame
Actually, I just discovered that my llc is forfeited. Does it make sense to touch it or it’s just better to create another llc? thanks
I want to register an LLC ex: “Blank, LLC “ with two DBA’s under it, “Blank Investments” (this is pertaining to Real Estate Investments) and “Blank Entertainment”, with a possible “Blank Eats” (This is pertaining to Health, Fitness, and Nutrition). My questions are:
1. What industry would I classify the LLC under since I am dealing with 2 or possibly 3 different industries?
2. Throughout my business dealings when would I use my LLC name instead of the individual DBA names?
Thanks in advance for your help.
Hi Brielle,
We are sorry for our oversight. Your question slipped through without an answer.
Each state where you file your LLC registration has its own rules. Some states will ask you to register your business industry based on what you anticipate having the most revenue for. And others are silent on the matter. So, explore you own state’s rules on the matter before you select an industry registration code.
The fictitious names (DBAs) should be used for marketing the various lines of business and the LLC official name is used when you are filing official forms, reports, taxes, etc.
All the best…
Hello i have a business that has multiple jobs, such as hair, health products, consultant work for homeowners, interior decorator and online shopping. How do i label my business , I getting my EIN and its asking me what type of business do I have, I picked other services but it says what type.
Hi Veronica,
As I see it, what appears to be consistent with your listed jobs are personal services — B2C — Business-to-Consumer services.
All the best…
I am leaning towards one LLC, and two DBAs (blog websites) under it. Online income would be generated from merchandise, G. adsense, and other affiliate income. It makes sense to me in multiple situations to have all of my affiliate accounts under the LLC, since certain affiliate income payouts can scale as your volume increases. Does this sound like a good approach?
Bookkeeping: I need to pay webhost/domain name company. Should I have the LLC’s credit card make the payments? Is it necessary to go the extra step and have the DBA reimburse the LLC for it? Same way with affiliate income coming in, do I take an extra step and divide the income up and deposit it to each DBA bank account?
You emphasize the importance of keeping separate bookkeeping records, but in this situation, there are platforms and affiliate income that would be shared. There hardly seems a reason for me to have bank accounts for the two DBAs, and manage them together, blurring the lines.
Hi Renee,
If you have one LLC (business entity) and multiple DBAs, you will have only ONE EIN. And it is the EIN which will be required when you set up your Amazon, Google Adsense and affiliate accounts. So, it does make sense to have all of the income deposited into a single account.
Similarly, using the LLC’s credit card to make payments for the hosting, domains, etc. is not problematic.
That said, and because I work in the world of selling (and buying businesses)… if you ever intend to sell one of your blog/websites to a third party, having separate bank accounts and accounting records for EACH will be a very good thing to do! Otherwise, proving to a buyer the income and expenses you have for one of your sites, will be a challenge.
All the best to you with your new sites…
If I have an LLC that currently conducts business and I want to add a second business without having to form another llc, can I get a dba under my llc ( so that my two business are the llc and the dba) or do I need to have 2 dbas (for each business) that run under my original llc?
Hi Lisa,
If you intend to operate your second business under a trade name which differs from your existing LLC’s official, legal name, then your LLC should apply for a fictitious name (DBA) certificate.
Two DBAs are not needed as long as your LLC’s name is being used as it was applied for when your formed your Limited Liability Company.
We have another post on the topics of DBAs which may be helpful to you Lisa.
Hello!
My husband has a business entity. I want to start my own little business under the Cottage Food Law (which let me cook and distribute food from my home).
Both businesses have nothing at all in common.
Can I create my DBA under his business entity name? At least for the first year to see if my business is picking up.
Thanks for your help. Best
Hi,
I have a small single-member LLC and want to open another business. We will share the same rental space and liability insurance. What is the best way to set this up in case I’d like to sell one of the businesses separately in the future? Should I register another LLC or DBA? Also, would you recommend separate bank accounts?
Thanks!
Register a new LLC with its own checking account (and QuickBooks; you’ll want track performance). When it comes time to sell, everything is clean and separate so you can identify value.
Alex,
The best advice requires an in-depth discussion with competent counsel. Here’s what you need to know.
First, there’s something called the series LLC that we recommend for some of our clients wish to segregate assets and liability without creating more entities. This may not work in every state.
Second, if you wish to sell the business, you’ll likely have to convert into a C-Corp. Experienced investors like the consistency and familiarity of the C-Corp, especially a Delaware-registered one.
Third, if it’s another business, don’t comingle the funds. Get a separate bank account. And also ensure that the new company, whether a DBA or LLC or C-corp is named on the liability insurance.
If you’d like more detail, speak with legal counsel or ask for an ExitPromise Advisor.
Warm regards,
Rita,
It depends on your state rules regarding DBAs. You may have to amend the registration after to create the new LLC.
Cordially,
Kwame
Good day,
If I have an llc and I want to open a business using the DBA, do I list the name of the llc as owner of the business or do I have to use my personal name.
Thanks in advance.
Dennis,
This depends on the state of the business and the DBA. Additionally, various industries have display and disclosure requirements. A quick conversation with local counsel or a visit to the city’s small business website might provide some guidance.
Cordially,
Kwame
Hey Dennis,
I wanted to ask what you meant by “open” a business? A business lives regardless of the structure. If you’re looking to open a bank account, you would then have to provide your name and the LLC’s details to the bank; some might want an operating agreement. The state where you’ll be operating determines what you must disclose.
Don’t hesitate to reach out if you’d like some professional advice.
Scotch & Palm
If I form a dba under my llc can I use my llc’s bank account for both? Can my llc deposit checks made out to the dba since It is under the same EIN and not a separate company? And would the dba need a separate quick books account or can all Income flow back to the llc? I’m basically looking to use a new name without going through the expensive name change for the llc so I would just keep it for the liability protection and sell services under the dba name. Thank you
Hey Matt,
You’re asking a very practical question many small business owners struggle with. DBAs, LLCs and banking. This is why it’s very important to work with a good (ideally local/community) bank because they would provide the forms to allow you to make deposits without much friction.
While this might vary from state to state, once you form the DBA, take the certificate to your bank and they should be able to handle the rest. If it’s unclear, ask your bank. Don’t get us–the attorneys involved–when the people who already have your money can easily solve this issue.
p.s. Make sure your customers know that they’re paying a fictitious entity. It’s good business practice that will save you from unjust legal troubles.
My husband and I just formed an LLC and will be operating under separate DBAs. I decided it would be best for each of us to have our own bank accounts for our DBAs so we can easily track our income and expenses. But do I need to open an account in the name of the LLC as well? Each DBA will be handling it’s own expenses and payroll, so I’m not sure what would be funneled through the LLCs accounts and if it’s even necessary. Thanks!
Hi Claudia,
Choosing to operate the two lines of business separately is always a good idea! I know I keep saying this, however it’s worth repeating: If you ever decide to sell one or the other DBA, having a separate set of bank accounts and accounting records will be very helpful!
Given your circumstances, you do not need to open a bank account for the LLC, unless the LLC has its own separate income, expenses, assets and/or liabilities.
All the best…
Hi Claudia,
Holly’s right about the logic of separating the banking and bookkeeping. There’s no need to establish a bank account for the LLC but it really depends on what kind of business you’re in, what state you’re in and what kind of business you have.
Setting up bank accounts in the name of a DBA–essentially a trade name– rather than in the legal name of the individual or entity that owns the business is a complex process, requiring documentation proving that you have a right to use the business name.
Remember that the DBA provides no legal protection in itself, and the LLC provides no legal protection if you don’t use it appropriately, in accordance with the state’s and county’s laws.
Cheers,
Kwame
i have a corporation that has been doing business as two different entities for the past 20 years. I want to sell one of the entities. How do I do that? Do i sell shares of stock, (how would I determine that?) or just straightforward name the entity and what equipment, customer lists, copyrights, and good will that go with it?
Hi Elizabeth,
It sounds to me that you have a corporation which has been operating two lines of business, not two different entities.
If this is the case and you only want to sell one of the lines of business to another party, you will have to negotiate the sale under an Asset Purchase Agreement (not a Stock Purchase Agreement).
We have a number of posts on this subject. Here’s one which may offer you additional information.
All the best…
Hi Elizabeth,
Holly’s right, so I’ll just add some colour.
You might have two viable options. First, can sell via the Asset Sale, as Holly described.
Second, you might be able to spin-off the business line into another entity, Newco. Then, you would sell 100% of the shares of the existing company.
The tax consequences, in either case, may vary significantly, so make sure you consult with a tax advisor and attorney familiar with securities and small businesses before you start trying to sell stock or assets.
Cordially,
Kwame
So if I have one LLC with three DBA’s under that umbrella LLC, should I have four separate bank accounts? And what if one client participates in 2 of my services ie: emotional counseling and reiki? the dba’s are for yoga and meditation, reiki and emotional counseling. I am slightly confused and hoping you can help
Hi Rowan,
Typically, when you set up a fictitious name (DBA) under a business entity, you want to set up a separate bank account and keep separate accounting records even though at the end of the year all of the income, expenses, assets and liabilities would be reported on the LLC’s tax return. Doing so helps you keep track of each line of business and if you would ever choose to sell one or more line of business, it’s much easier.
Given how closely the various lines of business you’ve described in your question seem to be (at least to me), it’s not clear why you want to market these services separately. Especially so if your clients are patrons of multiple services.
If the LLC is able to market the various services you are offering and you want to protect a specific trade mark or service mark, then you may want to consider registering these with the USPTO.
All the best…
Hi Rowan,
I recommend my clients to look into the “Profit First” system of small business financial management. If you simply want to track the accounts of the DBAs, then use three primary accounts and use Profit First to manage the sub-accounts.
However, if your DBAs are generating intrinsic value as a trademark, then you might want to protect that mark, at the state level and possibly the federal level.
Lastly, speak with your financial advisor about how to simplify your life here.
Cordially
Kwame
I have a small medical transport business and thinking about joining forces with an adult family home who was thinking about starting a transport business. Looking at the best way to do this. A subsidiary, a dba, or something better. Any help would be greatly appreciated. We will start by dedicated one vehicle strictly for his AFH and the county he lives in. Then expand from there.
Hi bagenske,
If you intend to have the adult family home (or its owner) own some of the new medical transport business, using a fictitious name (DBA) for your existing business will not work. You can’t share a line of business with another party because the DBA would be part of the business entity and not something separate with regard to ownership.
You could consider forming another business owner which could be partially owned by your existing business.
There are many ways to structure the new business you’d like to form. It’s important to think through what the business will ultimately achieve for you, your business partner and your respective businesses.
Consulting with an Attorney would be wise. If you need a referral to a Startup Attorney, let us know here and we will be happy help.
Dear Bagenske,
What you described might work well in a joint-venture. Holly was right to suggest that “you could consider forming another business entity” and the existing business (or you as an individual) can be part owner.
However, based on your goal of “joining forces”, I don’t think you need to do all of that. You can just execute an agreement to become their sole vendor. Think about your insurance coverage and the various potential conflicts that could arise by combining both entities. And what happens if you guys decide to end the relationship?
Seek local counsel—it’s worth the upfront cost to avoid the expensive backend headache.
Hello –
We have a business and 3 of our friends have their own businesses. We want to come together to hold events/fundraisers and thought about coming up with a name for the group of companies. Could that “group” have a separate name and if so, should we set it up as one of the business structures? Thanks!
Hi Mellarie,
Because you included the word “fundraisers” in your question, it’s implied the group you want to gather will have some sort of philanthropic purpose.
If this is the case, you may want to consider forming a corporation and then applying for a non-profit status with the IRS under one of the code sections which will allow all of the businesses you and your friends own to participate in the events/fundraising.
Forming a non-profit organization must benefit the public, not simply a few individuals or businesses. So this strategy should be thought through carefully.
Hope this helps a bit…
Hi Holly,
Thank you for responding! The events (parties, concerts) will be to raise money for the “co-op” of companies, if you will. We as a “co-op” will barter services to each other and use the money to promote our brands and entertainers we all support. We do not work for them, but all work together for the good or benefit of everyone. We will provide entertainment for non-profits, but this would not be a non-profit.
Given your intention to promote one another’s business, forming a Co-op may make very good sense Mellarie!
All the best…
Dear Mellarie,
Depending on the state you’re in, you might want to consider becoming a public Benefit Corporation, which is a for profit social enterprise.
Here’s a good resource to see if your state offers such entities: http://socentlawtracker.org/#/map
And think about the legal liability because you’ll be dealing with the public in public venues.
This is very interesting information! I will check out the resource and take you advise into consideration.
Thank you so much for your time!
Hi Holly,
I have two companies listed as DBA’s in the entertainment industry. I want to do another company and make it an llc with the other existing companies under its umbrella. I currently have a bank account setup under one, but once the llc is formed would I have to add another bank account?
Thanks!
Hi Rita,
Yes, when you form the LLC, you should open a business bank account with its own Employer Identification Number (EIN).
All the best…
Rita,
If you’ve got two entities operating, it would be a good idea to limit your legal liability via a recognized vehicle, such as an LLC.
However, you may have to amend the DBA filing with the state, and prepare an operating agreement/by-laws that account for the DBAs the with the other existing companies under its umbrella.
And depending on the type of business, it might not make sense to form and LLC v. a C-Corp.
Cordially,
Kwame
The new tax law really changed the game.