Do you have an established business and want to start a new one? Or, do you want to start working on multiple business ideas together?

In both cases, you should consider having multiple LLCs to separate the income, assets, and liabilities of each of your businesses.

There are many reasons why you would need multiple LLCs. Also, having multiple LLCs has its pros and cons, so you need to consider carefully before you choose to have these.

In this guide, we’ll answer all your questions related to owning multiple LLCs and help you make the right decision. Let’s get right to it then.

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Can You Own Multiple LLCs?

Absolutely yes! You can definitely own multiple LLCs. It’s perfectly legal and a common practice.

Anyone who owns multiple businesses and wants to keep their operations, finances, taxes, and assets separate, can create multiple LLCs, one for each business.

Of course, you can choose to operate multiple businesses under one business entity, but that has several complexities. Creating multiple business entities helps keep your businesses separate and is great for tax reasons as well.

How can you decide if you should opt for multiple LLCs or look for alternatives?

Let’s find out.

When Should You Consider Having Multiple LLCs?

You can form multiple LLCs as a sole business owner or as one of a group of LLC owners.

Here are some situations when you should consider having multiple LLCs.

You Decide to Start Another Business

If you’re already running a business and want to start another one, having a separate LLC for your new business will be a good decision. It will help minimize your risk if one business fails.

For example:

If you run a successful agency and decide to open a cafe, you should form a new LLC for your cafe. Even if the cafe fails and you lose money, it will not put your agency assets at risk.

You Launch a New Product Line

Many business owners consider forming new individual LLCs to launch their new product lines. This helps them protect the assets of their existing LLC if the new product fails.

It’s especially useful if the new product line has completely different business operations and the business assets can be completely separated from the existing business.

In many cases, entrepreneurs create a holding company that owns multiple LLCs for different brands and product lines. This is a good way to handle complex business structures while still having centralized ownership via an LLC holding company.

You Run a Rental Real Estate Business

As a rental real estate business owner, you can consider having a separate LLC for each building you own and want to rent out. This will help you ensure that any lawsuit involving one property will not risk your other properties.

This also separates your business ventures from accidents or other financial troubles and ensures that your other properties are not affected if one property faces any trouble.

You Use Different Sources of Funding for Different Ventures

Suppose you want to secure funding for one business venture by bringing in investors or venture capitalists but don’t want the same for other businesses. In that case, creating multiple LLCs makes sense.

This allows you to use different sources of funding for different ventures. You can even bring in a different set of investors for different businesses, without overlaps.

Also Read:

• Best LLC Services: Top 23 Choices for Small Businesses
• Inc Authority vs ZenBusiness vs Incfile Review

Benefits of Starting Multiple LLCs

As mentioned earlier, starting multiple LLCs has several benefits. In this section, we’ll take you through some of the most important ones to help you make an informed decision.

Liability Protection

One of the main benefits of creating multiple LLCs is that you protect your other businesses if one business faces any legal or financial troubles.

Let’s say you own three different businesses, each operating under a different LLC. If one LLC is in a lot of debt or faces a lawsuit, the other two LLCs have nothing to worry about. As they’re completely different entities, they will not be held liable for the failure of the first LLC.

However, if you run three businesses under the same LLC, then the other businesses will be affected if one fails or gets into legal or financial trouble. In this case, the assets of other businesses may be seized to pay off the debts incurred by one business.

As such, creating multiple LLCs helps you protect your different business ventures and provides liability protection for them.

Business Separation

Another advantage of creating multiple LLCs is that it helps keep your different business ventures separate, both operationally and financially.

Managing several businesses that have nothing in common can be challenging for anyone. However, if you manage each business separately, things become much easier.

You can appoint a different person to run each company and take control of its day-to-day operations.

This separation also gives you the chance to create a unique and distinct brand image for each business. As such, if one business faces a reputation or image issue, it wouldn’t affect the reputation of other businesses under your portfolio.

Again, creating multiple LLCs diversifies the risk by keeping different businesses owned by the same owner completely separate.

Tax Flexibility

As you probably know, limited liability companies can choose how they want to be taxed.

The default tax structure of a single-member LLC is similar to that of a Sole Proprietorship and that of a multi-member LLC is similar to a Partnership firm. In both cases, the business can enjoy pass-through taxation.

However, depending on your type of business and business location, you may benefit more from having your LLC taxed as an S-corp or even a corporation.

If you have multiple limited liability companies, you can choose a different tax structure for each, based on what’s most beneficial to you. This gives you a lot more flexibility than what you’d have if you had just one LLC for all your businesses.

Management Flexibility

Next on our list of benefits of multiple LLCs is management flexibility. When you create different legal entities for each of your businesses, you also get to appoint different management teams for each.

Each of your business can have a different CEO and senior management team. This makes managing different businesses much easier than it would have been with central management for different businesses.

Real Estate Asset Protection

Having multiple LLCs is especially beneficial for real estate businesses with multiple properties. Instead of owning these properties under one LLC, you can create multiple LLCs, one for each property.

This will keep each of your assets separate from each other and protected in case one faces any financial or legal trouble.

Does this mean only real estate businesses benefit from this?

No. Any kind of business with heavy substantial real estate assets should consider separating itself from other businesses under the same umbrella.

Let’s say you run five businesses, and two of those businesses have significant real estate assets. In this case, you can create three LLCs, one each for the two big businesses with major assets and one for the rest. You can, of course, choose to create five LLCs as well, if the benefits outweigh the hassle.

Ease of Ownership Transfer

Having multiple LLCs is vital if you’re a serial entrepreneur who likes starting successful businesses and selling them to bigger companies.

Since each business is a separate entity, it’s easy to transfer ownership. You can very easily sell your businesses to different owners, without it affecting the rest of your business ventures.

However, if you operate multiple businesses under a single LLC, then transferring ownership would be more difficult.

Also Read:

• 4 Key Tax Benefits of an LLC for Your Rental Property (2024)
• Freelance LLC Guide: Everything You Should Know in 2024

Disadvantages of Having Multiple LLCs

While having multiple LLCs can seem like a blessing, you need to understand that forming and maintaining multiple LLCs is more complicated than running just one.

As you can imagine, the more legal entities you have to manage, the more hassle it would be.

Let’s discuss some of these disadvantages briefly.

More Paperwork

One of the biggest disadvantages of owning and managing multiple LLCs is that the paperwork increases multifold. It’s, in fact, directly proportional to the number of LLCs you have.

Some common paperwork associated with starting and running LLCs include:

• Articles of Organization and other formation documents
• Employer Identification Number (EIN) application form and related documents
• Annual report filings, if required by the state where you conduct business
• Other annual compliance requirements, including tax filings

If you have one LLC, you do most of these just once. If you have ten, the paperwork multiplies ten times. You get the gist, right?

Unfortunately, there’s no way around it. If you want to run multiple LLCs, you need to do all the required paperwork for each, so be prepared for it.

Complex Accounting and Financial Management

The second most important thing you need to consider when starting multiple LLCs is the accounting and administrative hassle it will create.

You’ll need to set up a separate accounting and bookkeeping process for each business and manage their books separately. This can be tedious if you try to do it yourself.

Instead, we recommend hiring a bookkeeper or accountant to manage the accounting for different businesses. Since professional accountants have experience in managing accounts for multiple businesses, they can handle it for you.

If you feel you need to hire more professionals as your business grows, do it.

Also, you’ll need to open different bank accounts for different LLCs to keep their finances separate. This further adds to the complexities of running multiple LLCs.

Higher Costs

Similar to paperwork, the costs associated with running a business also multiply when you create multiple LLCs.

Consider the following costs:

• Filing fee for submitting Articles of Organization
• Filing fees for EIN, name reservation, etc.
• Filing fees for annual reports
• Legal and accounting fees
• Other administrative costs and business expenses

If you have let’s say three LLCs, instead of one, your costs will almost triple. Even if you hire the same accountant for all three businesses, for instance, you still need to pay them to maintain three books, not one.

Similarly, even if you hire the same lawyer to represent you, their fees will not be the same as it would be if they were representing just one business.

Running each business separately would also require you to spend more on day-to-day business management and administrative work. So, consider these costs when you choose to run multiple LLCs.

Multiple Tax Filings

No one likes doing taxes, whether it’s for personal tax returns or business taxes. When you run multiple LLCs, you need to do a separate tax filing for each business, which increases the hassle.

While you can counter that managing each business’s taxes separately is easier than doing a single tax filing for multiple businesses, there are two sides to it. In the case of separate filings, the tax liabilities would be easier to figure out but you’ll still need to do tons of paperwork and multiple filings.

As such, you can overcome this challenge by hiring a professional accountant to prepare and file taxes for all your businesses. Outsourcing can simplify things for you and make your life easier, but remember, it does cost more.

Separate Insurance Requirements

When you start a business, you need to invest in different types of insurance to protect the business.

Some common types of business insurance are:

• General liability insurance: It protects your business from lawsuits in case someone faces an injury on your business property.
• Product Liability Insurance: This covers your business against claims that your product caused an injury or damage to someone.
• Professional Liability Insurance: This is a must for any business that provides professional consulting services, such as lawyers and doctors. It protects you from any claims related to negligence or failure to deliver on your promises.
• Property Insurance: As the name suggests, it protects your business properties from things like damage, theft, or natural disasters. It covers both the buildings and major assets within them, such as equipment and furniture.

Now, you need some or more of these for each of your business. If you run a single LLC, a single insurance will cover all your businesses. However, if you run multiple LLCs, you’ll need to get separate insurance for each.

This can significantly add to your business expenses and will require additional paperwork as well.

Higher Compliance Risk

Lastly, the more companies you manage, the higher your risk of not complying with local, state, or federal regulations.

Managing one LLC is a task in itself, so you can only imagine how difficult managing multiple LLCs could be. You might miss one or two deadlines or fail to comply with simple rules, which could hurt your company’s reputation and standing with the state.

To overcome this, ensure that you appoint separate executives to manage each LLC and ensure compliance.

Regardless of the number of LLCs you want to form, our business formation experts can take care of all of the formation paperwork for you. It can save you time and money and ensure that all legal formalities are completed correctly.

We also offer expedited application processing when you form an LLC with us.

Also Read:

• How to Change an LLC to an S-Corp in 3 Simple Steps
• How to Start Your Freelance Business in 2024: A Quick Guide

How to Own Multiple LLCs: A Step-By-Step Guide

Here is the step-by-step process for starting multiple LLCs. Note that there might be some extra steps, depending on your state of formation, but these essential steps will remain the same.

Here you go.

1. Choose Your LLC Names

First, choose a relevant and unique name for each LLC, depending on the type of business and niche. Your LLC name should represent your business and follow the naming guidelines of the state where you want to establish the business.

You will also need to make sure that your chosen name is not currently in use by any other business and is unique and distinct. Also, ensure that your LLC name is not too similar to that of your potential competitors.

Lastly, get a matching domain name if you plan to create a separate website for the specific business.

2. Appoint Registered Agents

While this is not a mandatory requirement for LLC formation in most states, it’s still something you should do. Hire a local registered agent who resides in the state where you want to run your business and establish multiple LLCs.

A registered agent or resident agent is a person or company that is legally required to receive all legal notices and business correspondence on your behalf. They need to be available at the registered address during regular business hours on working days.

If you’re starting multiple LLCs within the same state, we recommend that you hire a single registered agent to handle all your business correspondence. Having a single point of contact will make things much easier for you in the long run.

However, if some of your LLCs are in a different state, then you’ll need to hire a different registered agent for each state.

We strongly recommend that you don’t be your own registered agent, especially if you run multiple LLCs. It will be a tedious task and will require you to be present at your registered address during all working days, which may not be feasible.

3. File Separate Articles of Organization

Now, prepare and file the Articles of Organization for each LLC with the office of the Secretary of State or concerned authority within your state.

You’ll need a separate application for each LLC, along with relevant documents and business details.

This is probably the most tedious part of filing multiple LLCs as it requires complex paperwork and form filings. The worst thing is that a single mistake can get your applications rejected.

That’s where we can help. GovDocFiling specializes in filing LLC applications and knows the ins and outs of the process.

We can help you file the Articles of Organization for multiple LLCs and ensure that your applications get approved in the first go. The best part is that we don’t charge anything for our LLC formation services and offer them completely free of charge.

So, contact our team and start multiple LLCs without any hassle.

Also, don’t forget to create separate LLC operating agreements for each LLC.

4. Get an Employer Identification Number

Every business should have an employer identification number or Tax ID as that’s what the Internal Revenue Service (IRS) uses to identify the business for tax reporting purposes.

Other than that, EIN is also helpful in several business use cases from opening a bank account to getting secure business funding.

The thing is, you’ll need a separate and unique EIN for each LLC that you own. This will ensure that each legal entity has its distinct identity.

Again, GovDocFiling can help you with your Tax ID applications, so leverage our services and benefit from our expertise.

5. Get Licences and Permits

Some types of businesses require specific business licenses and permits to operate. These legal requirements will vary from county to county and state to state.

As such, based on your business’s type and location, you may have different licensing requirements. Find out what you need for each LLC and get the required permits before you start business operations.

6. Open a Business Bank Account

Lastly, open a separate business bank account for each limited liability company you have. This will allow you to maintain financial separation among businesses and will simplify things for you in the long run.

Here are some advantages of opening a business bank account.

Each LLC should also have a separate accounting and bookkeeping process.

Once you’re done with these steps, you can start your different businesses and focus on business growth.

Also Read:

• 6 Steps to Starting a Real Estate LLC in 2024: A Guide
• Steps to Starting an LLC in 2024 (Limited Liability Company)

Alternatives to Owning Multiple LLCs

So far, we’ve discussed the pros, cons, and process of starting multiple LLCs.

However, that’s not the only way of operating multiple businesses and keeping their operations, management, and finances separate. There are some alternatives to multiple LLCs that you can consider and compare the various options to choose what suits you best.

Here are a couple of alternatives that you may choose from.

Operating Multiple DBAs Under One LLC

A Doing Business As (DBA) is something that allows you to run a business under a fictitious name or assumed name, rather than your official registered business legal name.

Most entrepreneurs use DBA for marketing and branding purposes since legal company names can be long and cumbersome. In such cases, they choose a short and catchy name to market the business to consumers and run day-to-day operations.

However, DBAs can be used for different purposes, one of them being an alternative to multiple LLCs.

If you have an established LLC and want to run multiple companies under its umbrella, then you can file multiple DBAs. This enables you to run multiple businesses with different names under the same parent company or LLC.

Key Benefits

• You don’t need to create multiple legal entities, which saves a lot of paperwork and hassle.
• It’s also much more affordable than forming and running multiple LLCs and has fewer compliance requirements.

Drawbacks

• If one business faces legal or financial trouble, all other businesses can be affected as they don’t get liability protection offered by being separate legal entities.

Opting for a Series LLC

In a series LLC, you form a main LLC under which there are multiple sub-LLCs. Each sub-LLC or series LLC operates as a separate business entity, with separate management, bank accounts, etc.

Similar to multiple LLCs, this also allows you to appoint different members or managers to run different businesses. Each LLC will work completely independently, while still being under the main LLC.

So how does it differ from forming multiple LLCs?

The key difference and biggest advantage is that you don’t need to do multiple filings. You simply need to do one filing for a series LLC and you’re set.

Irrespective of whether you do one LLC filing or multiple, GovDocFiling can help. We will take care of the process for you, without charging any service fee.

Now, let’s look at its benefits and drawbacks, especially when compared to forming multiple LLCs.

Key Benefits

• Provides liability protection for each LLC and one business’s legal troubles won’t affect the other businesses.
• Saves the cost and paperwork of filing multiple LLCs as you can just file for one series LLC.

Drawbacks

• Not all states allow series LLCs, so this option is only available to businesses within specific states.

Frequently Asked Questions

1. Should I have multiple LLCs?

If you run two or more separate businesses, having multiple LLCs makes sense. It can help you minimize your risk if one business fails. It can also protect your other businesses’ assets if one business lands in a lawsuit or debt.

2. Can I use one LLC for multiple businesses?

Yes, it is possible and permissible to operate multiple businesses under one LLC. Most business owners who do this file a DBA (Doing Business As) to operate another business under a different name from their LLC name.

However, you should not follow this practice. If a lawsuit is filed against any one of the businesses, you will not be able to protect the assets of other businesses under your LLC.

Having multiple LLCs for different businesses is always a better choice as it will help you separate the debts and liabilities of each business.

3. Can a person have multiple LLCs?

Yes, a person can have multiple LLCs.

If you have multiple LLCs, you will have to complete formation paperwork and pay the filing fee for each of your LLCs. You will also need to maintain separate bank accounts and financial records for each of them.

4. Is it better to have multiple LLCs or DBAs?

Getting a DBA will allow you to operate another business under a fictitious name other than the name of your LLC. You can use individual business names, accept payments, and market your businesses individually.

You will just need to pay your annual LLC fee for one LLC (and not for each DBA). You can report income earned from each DBA in a single tax report as the LLC owner.

Having multiple DBAs will not protect the assets and income of each DBA from the other DBAs. If one of your DBAs gets sued, all other DBAs under the LLC name will be liable.

For liability protection purposes, it is better to have multiple LLCs for each of your businesses.

5. Do I need a separate EIN for each LLC?

You will need to acquire a new EIN for your new LLC if:

• You form a new LLC with more than one member.
• You form a new single-member LLC and choose to be taxed as a Corporation or an S-Corporation.
• You form a new single-member LLC that has an excise tax filing requirement or an employment tax filing requirement for your employees’ wages.

You will not need a new EIN if you form a new LLC as the sole owner, do not choose to get it taxed as a Corporation or an S-Corporation, and do not have employees or excise tax liability.

However, you may still want to get a new EIN for banking purposes.

Filing for an EIN doesn’t have to be complicated. You can use our tax ID application to file for your EIN online in just five minutes.

Ready to Form a New LLC for Your Business?

The best way to start another venture is to form a new LLC for it and get going.

Pick a business name. File Articles of Organization with the Secretary of State, create an LLC Operating Agreement, and obtain your EIN/Tax ID.

Do you need help forming an LLC for your new business? We’ve got you covered.

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