Business Structure - Multiple Businesses or one Umbrella Company?

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Hello!

I'm brand new to the forum, and I apologize if this question has been answered before. I currently have a small DBA that does Emergency Medical Services training for a handful of businesses. This year, it looks like I'm going to be expanding a bit. I've been approached by a few other entities that would like me to do some other avenues that are only quasi related to my main DBA. I am in the process of creating a LLC for the DBA, my question being should I create multiple businesses to handle each avenue or create one company to take care of everything? I understand that the multiple bushinesses route creates more paperwork, etc. but is there a distinct advantage to it?

Thanks!
Frank
 

Edvin

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#3
Hi FPMA,

As Saifullah Khan suggested, you can operate different business units under a single umbrella.

The rational for different entities is purely logistical decision; for example:
  • You want to include spouse/friend as a partner for the new business venture.

  • You want to operate the business unit within another state (i.e. Delaware due to favorable business legislation, or Nevada due to lower tax rate, etc)

  • The new entity has its own protection that will not be affected by other business unit.

  • Your entity name (with LLC) used on contracts is not related to the new business unit.
    For example, your LLC entity name is "Medical Responder, LLC"; but, your new business unit is "Dog grooming", which does not match the LLC entity.
    I suspect you can create a new DBA with LLC suffix; the important thing is to make sure the LLC suffix is on your contracts.
You still need to manage your accounting, which can be in the same or or different bank accounts. Again, this is logistical practice for keeping things separate for the same reason that you may want to keep payroll account different from expenses.
 
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Small to Feds

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#4
You should know you can have multiple brands and multiple cost centers within a single company. I have several clients that market their commercial products and services under one brand name and their government efforts under another brand name. Both are managed and mapped to a single company name the public rarely sees.

The government (state and federal), the Internet and media advertising do not require a one for one relationship between company name and brand name. Warren Buffet's company, Berkshire Hathaway has hundreds of brand names and products/services from Heinz Ketchup to Real Estate.

As an example, "Rolling Joe's" could be a brand name and "Food Logistics and Supply" could be another brand name under a company umbrella registered with the State and the IRS as "FLS LLC" (or any other company name that your feel is summary in nature for your future plans). Your brand would then go "Out Front" in your marketing and in official or legal documents, if required, each brand would be identified as "A service of FLS LLC".

Hypothetically you could initially set up one cost center in your general ledger for your commercial, "Rolling Joe's Brand. If and when you decide on a bid structure for federal business you would set up a second cost center and a second section of your general ledger for federal work. That would allow rates, factors and accounting/ billing to be separate for the two operations to allow maximum competitiveness.

You business registration with the State and the IRS would allow you to roll the single operation initially and the two operations later into one business entity (FLS LLC).

Here is a bit more detail on the matter:

SMALL BUSINESS FEDERAL GOVERNMENT CONTRACTING ("Smalltofeds"): COST CENTER STRATEGIC PLANNING FOR SMALL BUSINESS SERVICE CONTRACTORS

When you register make sure you choose the LLC option for "Subchapter S ("Disregarded Entity" in IRS parlance). That will insure you pay no income taxes as a business and your revenue and expenses will flow through to your individual tax return(s). If there are more than one owner, the % of ownership in the operating agreement drives the % of revenue and accompanying expenses that flow through to each member of the LLC when a distribution is made.

You can view a free operating agreement text in the "References" file in the BOX on the right margin of the above site You can carve what you don't feel is relevant. It is pretty comprehensive. The agreement is not filed with the government but it should be signed by the members and notarized by your CPA or other notary and then made a part of the official company files.

Remember the name is not everything, but it is permanent once you register it and get a tax I.D. Number and an Employer I.D. Number from the State and the IRS and a D&B Number by applying to Dunn and Bradstreet thereafter.
 
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