Proper way of forming a LLC for 2 separate businesses

[forumuser]

What is the name of your state (only U.S. law)? Georgia

My husband and I are starting two business. One will be a Deli and the other will be buying foreclosed houses, flipping them, and selling them. I have been researching LLCs and subsidiary LLCs. Which is the better option: set up two separate LLCs, one for the Deli and the other Real Estate or set up a parent LLC and have two subsidiary LLCs which will be the Deli and Real Estate? Can the parent LLC be a "general" category and the subsidiaries be specific? Since it's just my husband and I for tax purposes, should the LLC be set up as a single-member (husband's name only) or form the LLC as a multi-member (husband and I each a separate member)?

 

[LdiJ]

What is the name of your state (only U.S. law)? Georgia

My husband and I are starting two business. One will be a Deli and the other will be buying foreclosed houses, flipping them, and selling them. I have been researching LLCs and subsidiary LLCs. Which is the better option: set up two separate LLCs, one for the Deli and the other Real Estate or set up a parent LLC and have two subsidiary LLCs which will be the Deli and Real Estate? Can the parent LLC be a "general" category and the subsidiaries be specific? Since it's just my husband and I for tax purposes, should the LLC be set up as a single-member (husband's name only) or form the LLC as a multi-member (husband and I each a separate member)?

The first thing that you have to research is whether an LLC is the best choice for either business. A retail establishment such as a deli might be best served by being either an LLC or an S-Corp, or even an LLC electing to be treated as an S-Corp, while a business flipping homes might be better suited differently.

However, I do think that the two businesses, as different as they will be, would be best separated entirely. That of course is my personal opinion, and you would best be served by consulting with both an attorney and a tax consultant.

Keep in mind a few things...

A single member LLC is a disregarded entity for tax purposes and would be treated no differently than a sole proprietorship.

A multiple member LLC defaults to a partnership and is treated as a partnership for tax purposes.

An LLC that makes an S-Corp election is treated as an S-Corp for tax purposes.

Those distinctions can be quite important depending on how the business is to be run...most particularly if you or your husband will have outside employment on top of the businesses.

One important thing to note is that for a new business, and sometimes even for an established but closely held business its rare for creditors not to require personal guarantees from the owners/members/shareholders. In addition, its relatively easy to "pierce the corporate veil" on liability issues for small business. Therefore, no matter which kind of entity you choose to form, its critical to have good funding, and good liability insurance...and above all...extremely good bookkeeping for each business.

 

[latigo]

What is the name of your state (only U.S. law)? Georgia

My husband and I are starting two business. One will be a Deli and the other will be buying foreclosed houses, flipping them, and selling them. I have been researching LLCs and subsidiary LLCs. Which is the better option: set up two separate LLCs, one for the Deli and the other Real Estate or set up a parent LLC and have two subsidiary LLCs which will be the Deli and Real Estate? Can the parent LLC be a "general" category and the subsidiaries be specific? Since it's just my husband and I for tax purposes, should the LLC be set up as a single-member (husband's name only) or form the LLC as a multi-member (husband and I each a separate member)?

For your specific purposes in managing separate and independent businesses through a fictitious entity it would be well of you to research the subject and the advantages afforded by a, "Delaware Series Limited Liability Company".