Is it legal/possible to incorporate one business to manage others?

Discussion in 'Legal and HR' started by jacksk, Dec 28, 2012.

  1. jacksk

    jacksk
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    Hello.

    Does anyone know if it's legal or even possible to incorporate one main company to manage all other business. If you incorporate this way will it protect you, or do you need to register all businesses in order to have limited liability? Franchise tax is way too much so I'm hoping to save some money.

    For instance I have some online properties that make some money from ad revenue. Another site that I offer online services. I'm looking to incorporate mainly for protection.

    Can all off these sites be under one (1) main limited liability company without having to register and pay for every single business?

    Appreciate any feedback. Thank you.

    Jack
     
  2. Fergal

    Fergal
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    Welcome to Business Advice Forum Jack, thanks for joining and posting your business questions.

    The answers to your questions will depend on the state or country your business is based in. Can you please reply to let us know?

    Most countries do allow what you are asking. Basically you would set up a holding company which owns the other companies, but it really does depend on the laws at the location of your business.
     
  3. jacksk

    jacksk
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    Thanks for the welcome! :)

    I reside in the State of California. Also to clarify my inquiry, I'm wondering if a parent LLC has umbrella like protection for subsidiaries.

    For example:

    Parent LLC

    Parent LLC d/b/a Child

    If Parent LLC is sued, generally there is protection for the owner's personal assets.

    If Chlid gets sued, does the limited liability protection from Parent LLC pass down to Child, so if Child gets sued it's actually suing Parent LLC.

    Or, if Child gets sued there is no protection for the owner's personal assets since Child is not a separate LLC?

    Thanks again!

    P.S. Also to note, my state's annual franchise tax to register an LLC is $800! I'm hoping one LLC can protect everything. I don't mind that the businesses will be mixed into one basket, I'm just worried about my personal assets.
     
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  4. ArcSine

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    Since both corporate / LLC statues, and liability / creditor laws, are written and administered at the state level, your definitive answer will come from an attorney with expertise in CA's version and nuances of these issues (assuming all the action takes place there, of course).

    But from a basic Intro to Corporate Law 101 perspective, the general idea is that if you have:

    • One LLC conducting multiple business activities;
    • None of the activities are set up inside their own LLCs or corporate wrappers, but rather...
    • The single LLC owns the assets, conducts the activities, and is responsible for the liabilities; then

    a suit against any of the activities is a suit against the single ("parent") LLC. There is no "child" entity to sue; technically, one cannot sue a business activity, but instead one sues the owner of that activity---whether it's a natural person, an LLC, or a corporation.

    The potential danger with this one-LLC arrangement is that a suit against the parent LLC exposes the assets of all the activities and puts them within possible reach of the plaintiff.

    If, for example, I'm injured in a building thanks to a wet floor, I could bring suit against the owner of that building. If that happens to be an LLC whose only asset is that building, then the best I can do is be given the keys and title to that building (for simplicity I'm disregarding wrinkles such as insurance coverage and possible "veil-piercing" angles). But if the owner of that building is an LLC which not only owns that building, but also owns a couple of restaurants, a radio station, and a trucking operation, well, hey howdy, I've got all kinds of tasty goodies to go after.

    The foregoing is one common reason why multiple business activities are frequently wrapped in separate LLCs, so that in the event of a suit against any one of the businesses, the assets of the others remain insulated. Whether or not it's worth it to incur the additional costs you've noted for multiple LLC entities, is dependent on the circumstances of the given situation (most notably, the value of the various assets, and the nature of the activities [i.e., how likely is a lawsuit in the first place]).
     
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