You started your business in California and formed a limited liability company (LLC) to go along with it. It was a success – so much so that you want to create a spinoff business. And you have an idea for maybe a third business, too.
But you have a big question: Can they all operate under one LLC? And should they?
You can put all of your businesses under one umbrella LLC. Or, you can start an LLC for each business you own. What would be the benefits of having several LLCs?
- By nature, LLCs limit liability. By having separate LLCs, your protection is increased. If Company A goes bankrupt, Company B and Company C won’t be affected. Owners of multiple properties often have LLCs for each, for example. If one property is affected by a lawsuit, the other properties will not be at any risk.
- If you want to sell one of your businesses, it is easier to do so if that business has its own LLC. There is no complication in separating that business from others in the LLC that way. Sometimes, it can become so difficult to split one LLC from the rest that it becomes almost impossible to sell the company you want to sell.
- Having individual LLCs could mean you’re in a lower tax bracket. Putting all your eggs in one basket – or businesses in one LLC – could put you in a higher tax bracket.
Your situation, of course, is unique. You’ll want to consult with a California business attorney to determine which structure – multiple LLCs or single LLC – is best for your business.