Most dental practices are unaware of the many, and often unthought of, items that need to be continually addressed for maintenance of the dental entity.
Read moreAt Stock Legal, “spring cleaning” in our corporate department means cleaning up a client’s corporate organization.
At this age and stage of life, spring means a constant barrage of cleaning challenge content on my social media. At Stock Legal, “spring cleaning” in our corporate department means cleaning up a client’s corporate organization. That includes cleaning up entity organizations where clients are running multiple unrelated business lines through the same entity. As watching someone methodically power wash a concrete driveway is soothing to me, I’m hoping that you find talking about entity cleanup to be mesmerizing.
Because LLCs are inexpensive to form, the benefits of operating your businesses under separate LLCs (as opposed to one LLC, even if there are multiple d/b/as) greatly outweigh the initial, relatively minimal, time, money, and effort to set up the separate LLCs. And go take a five-minute break and watch a few power washing videos!
The Longer Version:
If you’ve already formed an LLC for a business – for the sake of staying on-theme, let’s say it’s a concrete power washing business called Power Washing, LLC – and you want to branch out, it can be tempting to operate your new endeavor under your existing entity. It appears convenient – after all, you already have business cards, letterhead, bank accounts, and credit cards set up in Power Washing, LLC’s name. Unfortunately, this initial convenience can cause major business and legal issues later on.
Most business owners elect to form an LLC because of its limited liability. By running a second business through your existing LLC, you lose protections that your LLC affords, for both businesses. This is true regardless of whether your second business is directly related or connected to your initial business, and whether the second business is similar to or different from your initial business. Going back to our example of Power Washing, LLC, perhaps you want to begin offering lawn mowing services. If you run the lawn service company under Power Washing, LLC, the assets of each of those businesses are not kept separate from one another through the liability shield separate entities province, which then causes two main issues:
Now consider that if we formed Lawn Mowing, LLC, and operated it distinctly from Power Washing, LLC’s entity (complying with corporate governance principles), then the claim for the broken window could only be pursued against Lawn Mowing, LLC. Power Washing, LLC’s assets and its reputation are not at risk from the damage caused by Lawn Mowing, LLC. In this day of Google reviews and Yelp, protecting one’s reputation is more important than ever.
In addition to avoiding the above risks, forming a separate LLC for each business bestows several benefits:
Hopefully by now you’ve been at least begrudgingly won over and can appreciate the need for having separate entities for each business. We do have a couple “cleaning hacks” to make forming and administrating your separate LLC a bit more palatable (aside from hiring Stock Legal to form your new entity, of course!):
Most dental practices are unaware of the many, and often unthought of, items that need to be continually addressed for maintenance of the dental entity.
Read moreThe sale of a business is referred to as “taking one’s chips off of the table” because, the completion of the sale transaction, if carried off properly, pays the seller out and ends his or her risk in connection with the company.
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