Do I Need a Separate Corporation/LLC for My New Business?
Recently I have received questions from entrepreneurs who are starting a second line of business. They want to know whether the new business should be under the same legal entity – perhaps with a separate fictitious business name (FBN – or DBA for “doing business as”) – or under a separate corporation/LLC.
This is not really a legal issue: Either approach can work just fine. The differences between the two approaches are business-oriented.
The advantage of using the existing entity is minimal additional paperwork or cost.
The advantage of creating a new entity is that it isolates the businesses from one another. If one of the businesses fails or has serious legal or financial problems, the other business will not be affected.
Only the entrepreneur can decide whether the ability to isolate the businesses is worth the cost of a second entity. I suspect that, for many entrepreneurs, the answer would be “yes”.
Related post: Should I form an LLC or a corporation?
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Dana H. Shultz, Attorney at Law +1 510 547-0545 dana [at] danashultz [dot] com
This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact a lawyer directly.
Business Entities, Entrepreneurship, Startup
7/23/2010 | 8:34 am Permalink
One exception: when your existing company isn’t legally able to enter into the new business. This is typically because the company’s organizational documents contain a restriction on the business it can engage in. That restriction is mandatory for PC’s and PLLC’s in most, if not all, states that allow such “professional” entities.