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Is forming an LLC the best way to go?

Asked by: Stephen  — 8 November, 2011

For multiple businesses (ex. Franks Pub; Franks Auto Repair; Franks Diner) to operate under a single umbrella company name (ex. Franks Enterprises)… is forming an LLC the best way to go?

Answered by: admin  — 8 November, 2011

Dear Stephen,

Technically you could form an umbrella LLC and run all businesses under this company.

However, since the purpose of a Limited Liability Company is to separate the liability of the business from its owners, you should also consider the scenario where you separate the liability of each business from the other businesses.

This is what you could do: form an umbrella LLC, and then as each business matures separate it into its own LLC, owned by the umbrella LLC. Alternatively, you could use the umbrella LLC as a holding company (just to own the other LLCs), have each business separated into its own LLC and owned by the umbrella LLC, and also have a special LLC set aside for all the experimental businesses (also owned by umbrella LLC). This way you make sure all liability is well separated.

The only disadvantage of this scenario is the fact that you need to maintain all those LLCs, which could be somewhat costly, depending on the state of formation.

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