Starting a 2nd, different, company - DBA or new business?

Discussion in 'Starting a Business' started by bbigham, Dec 24, 2010.

  1. bbigham

    bbigham
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    I've had my own company (a partnership) for many years. But now my partner and I want to start an entirely different type of business ... in addition to, not instead of, the existing one.

    I can't seem to decide which is better: starting a new partnership from scratch or just registering a DBA name for the new enterprise. We are small enough (by choice) that we don't have to worry overly about financial or tax considerations. I'm concerned more with logistics. It would be more convenient, I'd imagine, to just have to deal with a single business bank account, merchant account, tax returns, etc. But are there any disadvantages that I haven't thought of? Can any of you think of any reason I *should* start a completely separate company?

    Any suggestions or advice would be appreciated.

    Barbara
     
  2. ArcSine

    ArcSine
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    Barbara, you'd need an attorney's opinion on this one -- an opinion given after he / she had seen the details of your particular situation -- but in general, one of the advantages of multiple entities is the insulation of each activity's assets from liabilities and claims of the other.

    If you have all of your assets under the ownership of one entity, then a lawsuit against that entity puts all the assets within reach of an adverse ruling. Ditto for an unsecured creditor's claim.

    The liability firewall advantage of multiple entities, though, depends on a number of things, one of which is that your "partnership" structure is one which creates limited liability in some way, such as a limited partnership, or an LLC.

    I realize that deviates from the "logistics" direction of your query, but I just wanted to lay it out there as a simple FYI.

    More to the nature of your question, the accounting fees shouldn't differ by much under either arrangement. Accounting fees tend to be driven primarily by the number of transactions that the accountant must process. 100 transactions per month, e.g., should entail roughly the same bookkeeping fees whether it was a single entity doing 100 trans or two entities each doing 50.

    Tax return fees won't have that same kind of direct proportionality, though, thanks to certain economies of scale that are present in tax return preparation. Two small returns will probably cost more than a single large one, even if total transactions, total revenue, total assets, etc., is identical either way. Your tax preparer should be able to quote you fee estimates for each arrangement.

    Regards,
     
  3. myusacorporation

    myusacorporation
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    On top of what ArcSine have mentioned I would like to add a little detail that might prove to be crucial - if you use the same merchant account and your account is set up to show transactions on your customers' card statements as, let say, "BUSINESS 1" then when you use it for your business #2 it would confuse your customers and might trigger a lot of questions and disputes. I don't know if your provider has an option to have different "labels" for different transactions, but if they don't you should consider at least getting another merchant account for the new business

    And probably get another bank account - those don't cost money usually, but a good way to separate the accounting of one business from another.
     
  4. bbigham

    bbigham
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    Good points, ArcSine ... Guess it's time to get serious and talk to some experts to guide me. It seems like it should be a no-brainer, but when you start considering all the ramifications, it's not something that should be done without considerable thought. Thanks!

    Barbara
     
  5. bbigham

    bbigham
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    Ooops.... I hadn't thought about that. I've been so used to dealing with a very small group of clients (who all know my business name) that I forget that the whole world isn't familiar with me!

    Thanks for the reply. It has helped!

    Barbara
     
  6. sallya121

    sallya121
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    If the new one is different with the partnership.I think a new one is better to start maybe.
     
  7. shymajones

    shymajones
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    Wattsasbestoss provides Asbestos removal services for quickly reacting to plant emergency situations such as eliminating the trees from your property.
     

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