Have you been asking yourself, do you need to create multiple
limited liability companies for your businesses?
In this video, I'm going to show you
when you need to create multiple LLCs for your multiple businesses
and when you don't even need to worry about it.
More importantly, I'm going to show you how you can possibly simplify
your business structures and still get the benefits that multiple LLCs can offer.
All right, let's get started.
All right.
So here's the thing.
I got a question from someone who is considering starting a new business.
They have this existing business.
They wanted to set up a new franchise with this potential opportunity.
And they wrote in and they said, Hey,
Clint, do I need to create another limited liability company?
And I thought, you know what?
This is a great topic for a video because people have that same question.
That is, if I'm going to engage in multiple different business activities,
when do I need to go out there
and actually set up a different LLC or a different corporation?
Could I not just run them all through that same business entity?
Well, I'm going to show you now is when you need to consider setting up
a different LLC or when it makes sense just to use the existing business entity.
Let's go to the board and I'll show you what I'm talking about. Okay.
So what we're getting that now is when we're talking about setting up multiple
LLC or corporations for business activity, we first want to look at
what is your business, existing business activity.
So let's say, for example, that this individual was in the business
of flipping property.
All right.
Now, I know this is real estate
topic right now that I'm talking about, but it doesn't matter.
You're going to catch what I'm what what I'm referring to here in a few moments.
So don't get hung up on the nature of this particular company.
Just think about it from conceptually how it might apply to you.
So let's say this client here is involved in flipping
and they decided to set up a limited liability company,
and it's treated as an S Corporation for Federal tax purposes.
Now, they would like to set up a separate entity to manage their rentals.
So they're thinking about setting, you know, setting up a different company
over here.
And, hey, why don't they set up a different LLC on this side?
And it's going to manage all of my various rental properties
that I own through through separate, limited liability companies.
Well, you could do that, and that makes sense.
That's one way to do it.
Or if you look at this flipping company and you say, all right, management
flipping, it's really all real estate related.
As long as you're not holding a lot of assets in this flipping company,
then the liability that comes from running
this type of activity here through here shouldn't impact you.
So that's the question you first need to ask yourself when you're considering.
Do you need to have multiple entities set up?
Is the liability all right.
You want to know whether or not the next activity you're bringing on,
is it going to create an undue amount of liability for my existing business?
Because if the answer to that
is no, it's not going to bring in additional liability for my business.
Well, then what I would tell you
to do is take your existing business and just file a debate.
We could file a DBA for this flipping company
and we can call it real time management.
So now it operates on this side over here, managing the, the, the properties.
We don't have a separate LLC.
We just got a DBA there and it's managing under
real time properties or whatever I said and that's handling.
But the money is getting paid over here to the flipping company.
So that's where the money would be going.
But people don't realize that.
They think they're dealing with that real time properties,
property management company.
So, so that's the first thing we want to look at.
Do you have a lot of liability?
So the liability is on this new company right here.
Is there a lot of liability there?
Now, at the same token, you could do the backwards.
You could say, all right, does this company have a lot of liability?
Because if I was setting up a second company over here,
write a secondary business on this side.
All right?
Maybe it's not property management.
Maybe it's going to be subject to investing.
So I wanted again, it's real estate related.
So there's still there's still within the same genre.
So that's something to keep in mind, too,
when you're when you're considering setting up another LLC,
are they within the same kind of asset class
or business class or they doing similar activities?
This happens to be real estate.
Maybe it's a ridesharing business, maybe it's restaurants, whatever that is.
So they still kind of similar in nature.
So if I was going to invest in Subject two over here,
maybe I
don't want this flipping company doing this activity over here
because I view this to be a little safer than what's going on in this site.
And if this company created liability, then it's going to blow up this activity
over here.
So again, the DBA, in my example, doesn't make sense
if you got a lot of liability here and very low liability
over here, you don't want this company hurting this company.
So again, liability is really important.
When we're focusing on all of these activities.
We want to ensure that we're not crossing things
there and putting ourselves in a situation where something goes wrong
with one of the companies, it can affect the other ones.
So that's the first thing I look at.
So the next thing I want to look at is going to be to
the business activity.
All right.
This is what you should be focusing on.
What type of business activity is that second business planning to engage in?
So, for example, if I had a company right here
that was involved in, say, it was a nail salon.
All right.
And then I decide I'm going to set up a second company over here.
I'm going to enter into selling energy
bars, health food, energy bars.
I want to get into that business. Health, food, energy bars.
Now, look at these two here.
I'm doing nails there. I'm selling energy bars.
They're so different.
It wouldn't make sense to have my nail salon
operating under a doing business as a DBA.
You know, healthy, powerful, broad bars,
healthy, powerful HPV actually kind of sounds like a venereal disease.
But, you know, that's not a good idea.
But the point is, is that it doesn't make sense to do that.
So in this case, what we're going to do is we're definitely because
the business activity is so different, we would want to set up a different
business entity for this one to be completely standalone.
So that's what I look at.
The third thing you want to look at and whether or not you're going
to need to create additional
LLC for your business or different business entities
and who are going to be the owners, right.
Do you plan to bring in different owners?
So if I'm owning this company here
and let's say the these were familiar
or similar, so I got a nail salon and maybe it's not energy bars.
Maybe what this is here is I'm going to develop
I'm going to say nail paint, but you got to paint nails,
whatever that stuff is that the women, if you're you know what I'm saying,
the stuff that gets painted on your nails, let's
say I come up with this line of cosmetics. There we go.
That's specifically for painting on your nails.
Now, that's that would work.
Well, I could put it into that business here as a DBA.
But the problem is, on this one over here, I've got these other three gals
that are helping me and they're coming into this business
and I own this business here by myself.
So it wouldn't make sense to tie this one in to here because by the fact
that I'd be giving them ownership over here.
So we have to look at who the owners are and determining whether or not we need
we should create a different business entity.
Now, if that's not a concern for you having multiple owners here,
then another thing to consider
is whether or not you want to sell the business in the future.
All right.
So the fourth one, Future Sale.
So if you're setting that other one up,
I'm going to go back to this one again because I think this makes a lot of
a lot of sense.
So if this was the the cosmetic line here that I'm developing,
we know that those things can go I mean, they can be really valuable.
There's one of those social media or not social media,
but reality TVs that the Jenners, I think it is
those girls have created all these lines
of cosmetics and clothing wear and things like that, and they've sold them.
They're worth, you know, hundreds of millions of dollars.
Well, so so obviously there
if you're setting up a business, you don't want it to be tied to here.
You want to build standalone value in this business.
So it can be sold.
So that means this should be a separate business entity
because you're setting it up for a future sale.
You don't want to co-mingle these two
from the standpoint that you want to keep your books separate and clean.
So that's what I would look at.
Now, let's assume that those aren't the issues
and all we're trying to do, we've got separate liabilities and
we're not doing anything with the future sale.
So then what might a how might you structure your company?
So one of the things that I did with this franchise individual
is that we had his existing business right here.
This is his Gissin escort and he's talking about this new franchise.
And I said, well, you know, you could set up a different business,
but this in the franchise,
there's a lot of things that they're related to in his structure.
But I can understand that with the franchise,
you have your own liability that you're concerned about.
This was a very low liability business.
So this one, we had low liability down here,
meaning that this is not going to get sued.
So I'm not worried about this thing being sued.
But then we have high liability up here
for that that franchise that was thinking about setting up.
So what we did is we set up a separate entity,
an LLC right here,
and then we had that LLC owned 100% by this existing corporation.
So this is where if you do decide you want to create a separate business,
you can actually look at bringing them into gether from a tax standpoint.
So I nailed it all about liability standpoint.
If anything goes wrong here, it's only this LLC that takes the hit.
But from a tax standpoint, any income generated here
flows down here to his s corporation and then that flows out to him.
So now we only have to file one federal tax return.
So when you're considering putting together multiple businesses,
one thing to look at is what is going to be the cost,
right, cost of maintenance of keeping that going.
So in this case, I only have to file one federal tax return.
Also, that's going to reduce my risk of audit by keeping things simple.
So I felt that that was the best strategy for this
particular structure, for this individual, and you can actually build that out.
So this has it's completely separate name over here, right?
This is separate it's a franchise not related to this at all.
And if you came up with another business again, you could create
another business over here and have it held by this company here.
And again, all the income would flow down to here.
Maybe this one is
selling blue pills
for men on Internet, right?
Well, maybe you couldn't do that one this way.
But you get my point that you could run separate businesses all up here,
keeping the liability contained in these separate structures.
But from a tax point, it's all flowing down to you.
So those are some of the things to consider.
If you're wondering, Do I need to set up multiple LLC
or corporations or different businesses for what I'm about to get involved in?
Here's what I would go through in the check points just to kind of determine
what is that structure going to look like and whether or not I should move forward.
Hey, if you want to learn more about structuring in general
how to use LLC corporations, then I'd like to invite you to my Tax
and Asset Protection Workshop.
I've got a link below in the video you can click on that.
It's a completely free workshop to attend.
I teach it live, but more importantly, when you come to the workshop,
you're going to be able to get your questions answered.
So if you got a specific question like this, I'm
bringing a team of attorneys and tax professionals to the workshop with me
where you're going to log in via Zoom and you can chat with them and they'll
answer these types of questions to make sure
that we're taking the structuring, the learning that you're obtaining
by watching me
and really continuing on the conversation and tying it back to you guys.
Check out the link and I hope to see you there.