What is the Best or Proper Business Structure?

[freshstart48]

I live in GA and my son lives in LA. He asked me to help him set up his businesses so he can legally operate in various states. He has several business ideas, which are somewhat related, and he wants all to be legally "registered".

I set up the initial LLC in August 2022 in GA (per his request), because it's what he wanted, where he grew up, and plans to move back here. The LLC is an experiential marketing and promotional staffing agency for brand ambassadors. And he successfully managed and staffed his LLC's first brand event in September in PA.

He now wants to include his other businesses, one of which is mobile sportsbook betting, which is legal in LA and other states, but not in GA (yet). He started last year as an affiliate for one of the larger companies in the sportsbook betting industry, and developed an online presence to promote their sportsbook app, using a name he came up with. He now wants that name to be trademarked.

Another business idea is to have a traveling food truck because he's already partnered with a local eatery that allows him to be on-site to promote sportsbook betting. The idea is give away free food in exchange for people signing up on these sportsbook betting apps.

So, it seems as if the next LLC ought to be registered in LA, and he could use that name, and the name he's using online, as DBAs, and/or add the TM symbol to those names. From what I've read so far in my research, if he goes through the process of registering with the federal government, there's a 12-18 month wait before his registered trademark is approved. I'm not saying he shouldn't apply, but doing so won't give him what he says he needs right now.

He has a potential contract in NJ and other states where sportsbook betting is legal, but must first provide evidence that he's 'licensed' in LA for sportsbook betting. He said his Parrish doesn't require a license. My research into LA requirements makes me think he only needs a vendors license, and someone already advised him that he didn't necessarily need to register as a DBA.

I know he needs an attorney to advise him properly, but neither of us have the financial resources to hire one right now. So I have been looking at a company that states access to legal advice is included for 3 months when choosing to set up an LLC through that company. I'll be calling today with questions, but thought I'd first ask here whether anyone could offer advice about the best way to set up my son's other business ideas.

He also has done his own "research" (what young people consume online) and believes he also needs a trust and wants an umbrella corporation that includes these other LLCs. I don't think all of that is necessary at this stage, but what do I know?

He's got big visions and is doing all he knows to do to own something he created while providing for his 18 month old daughter and wife, who is helping him with the financial and tax side of his business ideas.

And he's including me in his plans by having me do the admin stuff he says he doesn't have the time for because he's doing everything else. So, I'm being as supportive as I know how, but really feel like "the blind leading the blind."

Anyone have some helpful advice or recommendations as to how to properly accomplish what he wants?

Thanks in advance for your insight. It's appreciated.

 

[Zigner]

I know he needs an attorney to advise him properly...

Well, there ya go.

 

[Taxing Matters]

Anyone have some helpful advice or recommendations as to how to properly accomplish what he wants?

Despite the length of your post there is not enough information to determine the optimal business structure. A lot will depend not just on what kind of business will be done, but also how you're going to do it. Is he going to be the sole owner or does he have partners? If he's the sole owner now, does he foresee taking on partners in the near future (next one to two years)? How soon does he plan to move to GA? Is he taking on any debt for any of these businesses? Does he have employees (and does he know the tests that determine whether a person is an employee)? In which states, exactly, will he operate each business? Is he a U.S. citizen or permanent resident? What kind of assets does he have for the businesses and what assets does he have personally? Is he married? These are the sorts of things I ask clients who want to set up a business, and depending on the answers I'll usually have more questions. Despite what some websites claim, there is no one size fits all structure that is best for every business. You want to consider liability protection, ease of doing the business, and tax issues among other things.

I'll give you some general information to start with. First, trademarks are determined by use of the mark in commerce; registration is not required. But registration enhances his ability to enforce the mark and will give him nationwide coverage of the mark. So it is generally well worth it to apply for the trademark registration, but that doesn't have to hold up starting the business. I recommend he see a trademark attorney for help. The attorney can do the research to make sure that the mark is not already being used by someone else and can advise him on what make a good mark to use.

Second, the business generally will pay taxes to the state in which it is organized and in any state in which it conducts business operations, including management activity. For that reason, generally he'd want to establish the business in the state he lives (or is planning to live in soon) or a state in which he conducts substantial business. Bear in mind that wherever the business is organized it can be sued in that state. So picking a state in which he doesn't live or go to regularly will be more of a burden should he get sued. Also, the state in which the business is organized may tax the business even if it does no business there. That's the reason he generally wants to have it organized in his home state or a state where he does some substantial business. He's going to pay taxes in those states anyway and so there is usually no need to go to another state where he doesn't do business to organize it.

Third, with a few exceptions, he can do all the businesses using just the one LLC (or corporation, LLP, etc). There are reasons to use more than one entity, though. For example, if one business is particularly risky, he might want to isolate that in a separate entity. If the businesses are distinctly different, then it may make sense to use different entities. He has a choice of owning all the entities directly, or he can establish entities that are owned by the current LLC; that's known as a parent-child structure. There are advantages and disadvantages to each way of doing it.

There many be a lot more that needs to be considered, too, depending on the nature of the business. But hopefully the information I've given you will show you why it's a very good idea for him to consult at least a business attorney and a tax professional (tax attorney, CPA, or enrolled agent). There are a lot of moving parts, so to speak, when doing multiple businesses and some careful thought and good professional advice at the start will help him avoid trouble and extra taxes and fees that he might end up having if he doesn't have a good set up.

 

[adjusterjack]

But hopefully the information I've given you will show you why it's a very good idea for him to consult at least a business attorney and a tax professional (tax attorney, CPA, or enrolled agent).

Equally important, a commercial independent insurance agent.

 

[quincy]

... using a name he came up with. He now wants that name to be trademarked ...

... it seems as if the next LLC ought to be registered in LA, and he could use that name, and the name he's using online, as DBAs, and/or add the TM symbol to those names ...

... I know he needs an attorney to advise him properly, but neither of us have the financial resources to hire one right now ...

Here from the United States Patent and Trademark Office is a link to a trademark law “primer” - basic trademark facts to know before investing a lot of time and money into a specific name to identify your business:

https://www.uspto.gov/sites/default/files/documents/BasicFacts.pdf

As Taxing Matters mentioned earlier, trademarks (business identifiers) do not need to be registered in the U.S. to gain trademark rights. The rights are acquired through the use of the trademarks in commerce. Therefore, it is not enough to just search the USPTO’s database of federally registered trademarks to see if a name has trademark protection. You must also search state registrations, and you must search the marketplace for unregistered marks being used. The first user of a trademark is the presumed owner of the mark. Registration is not necessary.

The trademark symbol ™️ can be used to publicly claim ownership of any mark but it has no legal significance and ownership can still be challenged.