There may come a time when expanding a business or shifting operations of multiple businesses to one LLC is the right move to bring an enterprise forward.
But where to begin?
First, professional advice from an accountant and attorney should be sought, especially for liability and tax obligations.
Next, business owners deciding to start more ventures need to consider the best way to structure multiple businesses.
Know the Main Options for Structuring Multiple Businesses
Options can have a variety of financial, tax, and have legal ramifications, so advice from a lawyer and accountant will be helpful before choosing which route to take.
After this advice is sought, the three main options for structuring multiple businesses are:
Choice 1: One LLC to Run All Businesses
This option allows business owners to form a single corporation or LLC and then set up separate DBAs (Doing Business As) for additional companies to do business under different names.
Pros include:
- Consolidated costs – every business can have a separate identity and branding, but fees and registration only apply to the LLC
- Flexible payments – All companies have the ability to accept checks made out to their specific name
- Simplified compliance requirements – There’s only one business entity (and one EIN) to maintain
- Single tax filing – The Business owner reports income from the LLC and any DBAs under the main LLC
Cons include a couple possible legal ramifications:
- Individual businesses aren’t protected from one another – in the event of a lawsuit, all DBAs are affected
- The business owner needs liability protection for both the original LLC and any DBAs filed
Choice 2: LLCs For Each Business
This option allows business owners to form a new LLC for each enterprise. There is not limit to how many a person can form.
One huge advantage to creating separate LLCs is that businesses do not have to assume legal and financial risk of others.
However, each LLC will need time-consuming and costly registrations, as well as individual:
- EINs
- Licenses and permits
- Records and bank accounts
Choice 3: An LLC Holding Company With Individual LLCS Under It
This final option is the most common. It allows business owners to legally structure multiple businesses into LLCs under one holding company.
A holding company does not get involved in operations, and has a simple administrative role as an “owner” of the assets required to operate individual LLCs.
Setting up a holding company structure is attractive to owners who wish to:
- Sell a complete line of businesses or spin-offs of one of their businesses
- Obtain funding for a new business
- Provide liability protection as individual LLCs
Drawbacks include complexity and expense issues such as:
- Tax and legal complexities
- Separate LLC operating agreements and Articles of Organizations need to be filed
- Each LLC must maintain its own bank account, payroll, tax documents, and records
Other Details to Consider Before Filing in Michigan
The Michigan Limited Liability Company Act describes the way LLCs are formed and operate. Besides obtaining professional help, some considerations should be made before filing multiple businesses, no matter how owners decide to structure them.
To begin, owners should reserve business names by following these steps:
- Search the Department of Licensing and Regulatory Affairs to make sure LLC names are distinguishable from other corporations within the state.
- Fill out an Application for Reservation of Name
- Submit a Certificate Of Assumed Name for any company with an alternate name
Next, owners will need to obtain a resident agent and registered office in their articles of organization. This means a physical address within the states must be established, and an agent that can accept legal documents on behalf of the LLC must be hired.
Finally, It’s Time to File Documents for LLCs
Once you’ve made structural decisions, secured business names, hired a resident agent, and established a registered office, it’s time to submit LLC formation documents.
Michigan encourages owners to fill out and file either Articles of Organization or Certificate of Authority online, but physically mailing it is also an option (checks or money orders made payable to the State of Michigan). The filing fee is $50.
Expediting this process is available by submitting a separate CSCL/CD-272 Form for every document. In Michigan, expedition costs an extra:
- $50 for 24-hour formation documents (or a Certificate of Authority)
- $100 for same-day formation documents (or a Certificate of Authority)
- $500 for review of documents within two hours if received by 3 p.m.
- $1,000 for review within one hour if received by 4 p.m.
Getting Started Owning Multiple Businesses
Owners who seek professional advice from an accountant and attorney for liability and tax obligations, as well as make the proper considerations for structuring and registration before filing are well on their way to taking on multiple business ventures.
Start with getting help, then make restructuring choices with professional advice.
Whether forming one LLC with DBAs under its umbrella, choosing to file for individual LLCs, or creating an LLC holding company, this choice will set owners on a path toward multiple-business operations.
This is only the beginning.
At Michigan Business Broker, we have the experience and skills to make sure you have everything you need to succeed as a business buyer. Call us at (248) 220-3274 or look at the business listings we currently have on hand to see what might be a fit for you.