2 LLC's under the same Federal Number?

[Lion]

Any entity

They can have any entity they want or two. And, they can have one set of books or two. But, they have to decide if the legal liability issue is more important than financial reporting simplicity. It might be. Will both businesses be very profitable? Do they own the buildings? Knowing what will be entailed in the various choices, they must decide what they want. With full knowledge, they can decide. You job at this point is to explain to them what running two separate companies will entail re tax returns, financial books, payroll, directors' meetings, state filing requirements, etc. When your client makes his decision, you'll know how to proceed.

[Black Bart]

I once had a similar situation -- Mom & Pop clients wanted to buy three Dairy Freeze burger joints. Same worries as yours -- wanted bulletproof legal liability, but this Mom also said "I don't want three checkbooks." As a practical matter, whoever's going to be the secretary/checkwriter usually has the last word on this and some just will not fool with separation of inventory, expenses, etc. (although they may well pay you to make adjusting entries and inter-company transfers).

This particular deal fell through before those decisions were made, but first I gave them the same advice you've heard here -- one biz-simple books-larger legal exposure/ two-three biz-complex books-less liability.

I consulted a lawyer about the scope of S-corp (before the day of LLCs) liability, etc., but he said a small business' corporate veil can occasionally be pierced and, anyway, the injured party generally sues everybody in sight -- you, your wife, the corporation, the manager, any employees, and your dog if possible. He said S-corp protection was "okay," but the best thing to do was buy as big a liability policy as you could afford (or at least to the extent that your nerves are calmed).

[BOB W]

As I said before, Liability Insurance does not cover suppliers (accounts payable) only a separate entity does that.

[Barb]

Any Entity

Lion,

In answer to your questions:

Will both businesses be very profitable? No
Do they own the buildings? No, renting space

At this point it is looking like they will likely do just the Self Employment business and split the income & expenses between the two.

[BOB W]

I just got back from a seminar on LLCs and Delaware has created an LLC that allows multiple businesses under one LLC thus giving each business separate liability status. The problem is will your state recognize this type of LLC from another state, probably not. The point is, what you are looking for may be adopted by other states in the future.

Here is the Delaware link: http://www.alperlaw.com/delaware_series_llc.html

[Barb]

Thanks

Thanks, I will keep this in mind and check into it with my state.

[BOB W]

Thanks, I will keep this in mind and check into it with my state.

Just remember, it still requires separate books>>>no co-mingling of funds anywhere.

[Barb]

Staying as Self Employed

This company has now decided to stay self employed and just get a large insurance policy. Sooo, if I understand correctly, they can now do one checkbook and use classes for the 2 separate stores, right? Or, could we allocate expenses based on the % of income for tax purposes because they will be buying supplies that will be used at both places.

[BOB W]

This company has now decided to stay self employed and just get a large insurance policy. Sooo, if I understand correctly, they can now do one checkbook and use classes for the 2 separate stores, right? Or, could we allocate expenses based on the % of income for tax purposes because they will be buying supplies that will be used at both places.

From a management point of view using "Classes" ( Departments) would work well. Failure to record expenses properly can give a poor report as to profitability of each department. This is very important. Also many states require a sales tax registration for each location, be sure to check this out.

A large liability policy still leaves debts from operations on the first location. But chances are you would be buying from the same suppliers and if the second shop goes under the first shop would be cut-off if it did not pay the second shop's bills>>So a separate LLC may still not solve the problem.

A large liability policy may do just as well....................except for any lease on the second location. Leases can be very EXPENSIVE??????????????????