If I Set Up A Parent Company As A LLC, Do All The Businesses Under That Umbrella Need To Be Registered?

The short answer is no. The businesses set up under the Umbrella LLC will be established as doing business as (“DBA”). By using this method the business owner saves time and money. Other benefits to using a parent company to conduct all related business affairs is that the entity of the parent company can be changed without changing any of the sub companies, income and expenses are all kept in one bank account, and taxes are done under the parent company. While the above mentioned benefits keep running multiple businesses simpler there are consequences.

The major consequence of using Umbrella LLCs is that the businesses established under the parent company do not share the protection that comes with being a Limited Liability Company. For example if you have three sub companies and a judgment is entered against one, the assets from all of the businesses can be used to satisfy the judgment. Running multiple businesses as one can also make it difficult to sell one business when the need or opportunity arises. The alternative to the Umbrella LLC is what is known as a Series LLC.

The Series LLC is a fairly new concept and only a few states allow the formation. The Series LLC allows multiple LLCs to be control by a parent LLC. It requires that the LLCs are run separate from each other. Unlike the Umbrella LLC, all bank accounts, profits and losses must be kept independent. Due to the complex nature of Series LLCs business owners should consult both their attorney and tax advisor.

If you are interested in combining your multiple businesses contact the Murray Law Group, LLC.

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