While the basic process of forming a corporation or LLC is pretty simple, there are many ways of structuring your company (sometimes using multiple other companies) which we call an “advanced entity setup”. Basically, if you want to pursue this type of strategy we highly recommend you speak to an attorney or accountant who is familiar with not only your personal/business situation but also has experience with these more complex setups as there are various tax and legal issues involved.
Here are some examples of the ways to set up your company:
This is actually the easiest setup: it’s just one corporation or LLC that has simply filed a DBA (or multiple DBAs) to “do business as” another business name. So you might be “ABC Enterprises, LLC dba XYZ Software”. This keeps your accounting and taxes simple (only one company to track) while giving you the flexibility to operate under multiple names.
One company may hold all or part of several other companies. For example, an LLC named “ABC Holdings, LLC” will own “ABC Software, LLC”, “ABC Hardware, LLC”, etc. etc. Obviously this will make accounting, taxes and maintenance more complex as you own more companies (each requiring their own taxes, maintenance, payrolls, etc.).
In this scenario, you may own an “operating company” that builds a product or performs a service, but another that owns the building where that company operates or leases equipment (or provides supplies, etc.) to the operating company. In this scenario, you can split out your liability and cashflow across multiple entities. Obviously this can be fairly complex but is a well-known asset protection strategy.
Overall, the vast majority of our clients start simple and then get more complex as their company grows or their business needs require more complex protection. Mainly, most of our clients start with one business entity then perhaps add a DBA for a new line of business, then separate that business into its own business entity later.
Advanced Entity Resources
How Multiple Entities Work Together | LLC Partnerships | LLCs and Corporations: Next Steps