This guide will discuss the number of LLCs that you can own and the possible problems of having multiple businesses.
How many LLCs can you have?
In the United States, there is no such limit as to how many LLCs you can own. You can register as many LLCs under your name as you want, but this comes at a cost. More LLCs you own, more legal complexities will be there for you to handle, along with more maintenance and other expenses to keep your LLCs off and to run.
However, it is not all when it comes to owning multiple LLCs. While we have already discussed that there is no legal restriction on owning more than one LLC, there are other hurdles. For example, in their operating agreement, certain LLCs state that their members cannot become a part of another LLC. If you are a part of such an LLC that has a restricting operating agreement, you will not be able to own any other LLC.
LLCs define such operating agreements to ensure that they do not face competition from their members and ensure that the insights of that particular LLC do not go out. So many times, when LLCs’ operating agreement does not restrict their members from becoming a part of other LLCs, there comes the point for owners where they face an intense conflict of interest.
Conflict of interest in owning multiple LLCs
Owners of LLC members are supposed to follow a defined code of conduct to ensure that they fulfill their fiduciary and other duties towards the LLC.
Whereas some LLCs do not restrict their members to join other LLCs, they underline a moral code to ensure that their members do not join LLCs competing with them. It also provides no self-dealing between one member who is the owner or member of multiple LLCs.
If an owner is found to violate the defined code of conduct, he is responsible for all the inflicted damage. Similarly, owners or members have a duty of loyalty towards each LLC, so if, at any point, comes a conflict between two LLCs of the same owner, he becomes the first casualty of this conflict.
Should you own multiple LLCs?
It is a tricky question, and the answer to it lies in how well you can manage multiple businesses. If you are not a pro, it will make your business operations very complicated. It becomes increasingly difficult for the owner of numerous LLCs to fulfill his duties towards each LLC.
For example, an LLC owner is interested in an LLC that provides Tyres for vehicles, and the same owner has an LLC that deals with cars. If the owner wants to make a deal between these two LLCs to provide Tyres to the vehicles manufactured by another LLC, it may not be legally possible.
It is down to the fact that the owner will be benefitting from both sides of the contract, and loyalty duty towards one LLC will stop him from enjoying such a contract. However, some states in the USA may still allow such a deal to go ahead as long as the owner has a Bonafide intention, as each state has different laws when it comes to LLCs.
How do I set up multiple businesses under one LLC?
You can set up multiple businesses under one LLC instead of forming a dedicated LLC for every business. It is a process where your LLC owns all the companies, and those businesses work under a fictitious name, which is also known as ”DBA,” I.e., doing business. Some states, like Delaware, offer another cheap alternative in the name of series LLC. However, it is not time-tested and is only available in very few states.
However, it should be kept in mind that there are multiple downsides to this. For example, since your various businesses will be working under one LLC, if a lawsuit appears against one of those businesses, all the LLC’s assets will be under threat. It is a process of putting all your eggs in one basket, and while it may seem easy to carry, all of it will go down if it goes down.
The traditional and battle-tested way of managing multiple businesses is to form a separate LLC for every business. There is no denying the fact that it also has its downsides, but it, so far, is the most effective legal structure since it will protect your assets better than any other structure.
Can I use my LLC for more than one business?
Yes, you can use one LLC for more than one business. This structure offers a DBA (doing business as) for each company to operate with the name of its choice under one umbrella LLC. However, it exposes your assets to claims, as a claim on one business will make the assets of all other companies vulnerable.
Can you have two LLCs at the same address?
Yes, you can have more than one LLC registered at the same address. However, the incorporation of each LLC needs to be done separately with the secretary of the state office of your state. No state restricts one LLC per one address, and there does not seem to be any legal difficulty with this in any other way.
Can I use the same EIN for more than two businesses?
You can have one EIN for multiple businesses as long as they are incorporated under one LLC and are not taxed separately. For example, you may have one EIN for two registered and operated hotels under one LLC. For the businesses that need to be taxed differently, you cannot have one EIN.
How many LLCs are there in the US?
There are almost 22 million workings in the United States of America as of this year. However, there is a new LLC formed every other day, so it is not a fixed number, and between the moment I write this to the moment you read this, we would have probably dozens of new LLCs formed in the US.