How Many LLCs Can You Have?

How Many LLCs Can You Have?

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Do you believe you possess the necessary skills to run many businesses?

Do you want to explore both of your unconnected new business ideas?

To keep your company assets separate and shield yourself from personal responsibility resulting from your business actions, you may choose to establish distinct limited liability corporations (LLCs).

We’ll go over the fundamentals of running many small companies, such as how many LLCs you may have, the benefits and drawbacks of having several LLCs, and how to get started.

The number of separate LLCs an entrepreneur may possess is unrestricted by federal or state law, but that’s not where the tale ends.

Problems With Owning More Than One LLC

You can form multiple LLCs to pursue different business goals and keep your assets separate and protected among ventures.

Conflicts of Interest

When you start a business, you take on what’s known as a “fiduciary duty” to the business, which means you’re expected to act in good faith toward your business, its members and its employees.

Though the law is not crystal clear in every state, assume that if you have two businesses directly competing with one another, you may face legal trouble.

Burden of Maintaining Separate Businesses

If you operate multiple separate LLCs, you take on maintenance responsibilities for each one separately. That means, if you own four LLCs, you must:

  • Go through the formation process four times
  • Hire a registered agent for all four LLCs
  • Create four operating agreements
  • File at least four tax returns each year
  • Obtain four sets of tax ID numbers
  • File annual reports and pay annual fees for four businesses

Hiring a reputable LLC formation service can ease this burden by streamlining the formation process and keeping your business documents on one online dashboard. Check out our review of the best LLC formation services in the industry.

Cost of Forming More Than One LLC

You’ll be responsible for the full cost of starting an LLC for each one you form. Costs to form an LLC include a filing fee for formation documents, paying a registered agent, filing fees for annual reports and yearly taxes for each LLC you own.

For example, that means California’s $800 fee per year would apply to each LLC.

Pros and Cons of Owning Multiple LLCs

Whether you should own separate LLCs depends on your specific situation and business goals. Consult with a business law firm or tax professional if you’re considering starting multiple LLCs.

There are common advantages and disadvantages to owning more than one business, including: 

Pros

  • Strong liability protection
  • Keeps assets separate so each LLC is protected from the potential failure of another
  • Potential for have tax benefits
  • Easy to change tax structure among LLCs (e.g., default pass-through taxation, C-corp or S-corp tax structures available)

Cons

  • Must maintain separate bank accounts
  • Must file multiple annual reports and tax returns
  • Additional filing fees required for each business filing
  • Multiple operating agreements must be created

Alternatives to Multiple LLCs

If you have more than one business idea to pursue, you have options. You can operate multiple businesses under one LLC or form separate LLCs.

Operating Multiple DBAs Under One LLC

Did you know you can have multiple DBAs under one LLC? DBA stands for ‘doing business as‘ and allows you to operate your business under a different name from your formal LLC name.

For example, an LLC called John’s Restaurant Group LLC can operate both JJ’s Diner and The Purple Parrot Pub as two DBAs under the LLC.

There’s no need to operate multiple separate LLCs unless the business owner wanted the diner and pub assets to be separate.

Registering multiple DBAs may be more manageable than running multiple businesses because you’re only responsible for maintaining one LLC.

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Include Business Structure in Your Operating Agreement

Whether you have a single-member LLC, or multiple members, your operating agreement can be structured however the members want. If the LLC registers multiple DBAs, that will need to be explained in its operating agreement.

Another way you can use your operating agreement to avoid having multiple LLCs is to affirm the separation of your business and personal assets.

Form a Series LLC

Depending on where you want to start your business, you may be able to segregate your assets into various subsidiaries that can operate under a parent LLC.

This is known as a “series LLC” and is a common option for real estate investors who want to keep properties separate under one LLC.

Only certain states allow series LLCs to be formed:

  • Delaware
  • Illinois
  • Iowa
  • Nevada
  • Oklahoma
  • Tennessee
  • Texas
  • Utah

California doesn’t allow the creation of series LLCs but allows such companies formed in other states to register and operate in California.

Speak with a business attorney about your options for creating a series LLC if you live in a state that doesn’t recognize them. Though not widely available, series LLCs are more convenient than creating a separate business to keep assets totally separate.

To form a series LLC, you go through a regular LLC formation process and file additional paperwork for each “series” under the parent LLC. It requires some extra work but not as much as if you created multiple separate LLCs.

How to Form Multiple LLCs

To form multiple LLCs, simply follow the 5-step formation process in your state for each business you want to start.

Step 1: Choose a Name

Your LLC names must be unique from each other and from any other business operating in the state. Each name must include “limited liability company,” “LLC” or a variation.

Step 2: Designate a Registered Agent

Every separate LLC needs a registered agent with a physical address in the state to accept official mail on behalf of the business.

You can hire a commercial registered agent, hire a private registered agent, appoint an employee or member of your business or serve as your own — but your business can’t serve as its own registered agent.

Step 3: File Articles of Organization

File the required formation document (also called the certificate of formation in some states) with the appropriate agency, usually the secretary of state, and pay the filing fee.

Your articles include critical business details like name and contact information, registered agent information, and occasionally management structure and purpose of business.

An LLC formation company can help you fill out and file your formation paperwork for a fee.

Step 4: Create an Operating Agreement

Even if you have a single-member LLC or live in a state that doesn’t require an operating agreement, it’s a best practice to have one.

This document lays out the structure of your business including limited liability protection, management structure, voting rights and anything else you want to apply to your business.

Step 5: Obtain an EIN

An employer identification number (EIN) is a free tax ID number from the IRS that allows you to hire and pay employees and engage in other business activities like opening a bank account or contracting with vendors.

How Many LLCs Can You Have? FAQ

Can you have multiple businesses under one LLC?

Yes, in most instances you can operate more than one business under an LLC by either forming multiple DBAs, creating a series LLC or otherwise legally separating assets within your LLC.

Can you have more than one LLC in every state?

Yes. States don’t prohibit anyone from owning more than one LLC. However, remember that if your businesses compete with each other, you may open yourself up to legal action.

Is it smart to have multiple LLCs?

Whether you should have multiple LLCs depends on your business goals and the structure and purpose of your businesses.

If you want business assets to be kept totally separate to enhance your liability protection, multiple LLCs may be a good idea for you. Consult with an attorney or tax professional to learn more.

Can you have multiple LLCs under one EIN?

No, you’ll need a new EIN for each LLC.

Can two LLCs have the same address?

Yes, two LLCs can operate out of the same address. Keep in mind that customers searching for your business online may get confused seeing different business names at one address. Consider whether a unique virtual address may be a good move for your LLC.

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