Startups Stack Exchange Archive

Using an umbrella LLC to spawn brands with different focuses?

Background: I’m building a company (mobile app development) with a friend of mine, whose wife is working a partnership home business with my wife (product sales).

Problem: Since we’re a very close group, we don’t see the need to separately file to establish separate companies, despite the focuses of each being so different. Can we establish a single LLC and operate both of the “sub-companies” as “brands” within the LLC?

Does this provide us with any benefit other than not having to establish/maintain multiple companies?

Answer 120

The main advantage to creating an LLC with a group as small as the one you mention is to protect yourself and your co-founders from any losses the LLC might accumulate. It does this by separating your personal finances from that of the LLC’s. For example if someone got injured using one of your mobile apps, and they sued the LLC for all you got, they’d only be able to get at any money you’ve pumped into the company, they wouldn’t be able to get through to you.

By creating an umbrella LLC, you’re tying together the finance’s of your company and your wife’s. You still have the degree of separation between yourself and the company, but it would try the two companies together until you decide to break them off. If you’re okay with this then I think an umbrella LLC would be a great way to save on maintenance work, and also to save a little on filing fees (I know in New Hampshire it’s $100 a year to maintain an LLC).

Answer 123

There are a few other factors to consider:

  1. If an investor wants to invest in one, you would have to separate it out
  2. As they become bigger it makes it harder to separate, you would still need to do extra accounting work to see how each business is performing.
  3. If one business goes down it takes the other with it.

If you only have micro businesses and sales are very low this might be manageable but problems arise as you expand.

As for benefits I can’t see any additional, just headaches waiting to happen if you don’t break off at the right time. However if one of them doesn’t really go anywhere and it fails, then it is easy to just start up another one under the same umbrella. So as per my previous comment, if they are micro businesses just getting started it may be good to keep the costs low but only while they are doing limited sales.

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