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Limited Liability Companies: How Many Should You Own?

By Business Lawyer

limited liability companiesMany entrepreneurs have big plans for their startups. Unfortunately, as part of those big plans, they often want to treat a small business as if it is a large complex organization that needs multiple limited liability companies (LLCs) for asset protection and tax avoidance.

Trump’s Limited Liability Companies

According to a recent Wall Street Journal article, Donald Trump has at least 96 LLCs that he uses to protect what he owns and to legally minimize taxes paid. This is typical for a large business empire, particularly one that involves intellectual property licensing (the Trump brand) and real estate ownership.

As A Small Business, Should You Have More Than One Limited Liability Company?

According to Texas Business Lawyer Mike Young, author of How to Form a Texas LLC, as a general rule of thumb it makes sense to set up separate LLCs for each asset or annual revenue stream that exceeds $100,000 in value. In addition to the potential tax advantages, each LLC serves as a separate protective basket for one of your nest eggs in case something goes wrong with one venture (e.g. bankruptcy) or asset (e.g. slip-and-fall personal injury lawsuit).

Of course, each entrepreneur has a unique story with specific legal needs. This means you’ll want to discuss your assets and income streams with an experienced business lawyer. Working together with your accountant, you can set up the number of limited liability companies you need to achieve your goals.

Limited Liability Companies Offer Asset Protection And Tax Benefits

By Internet Lawyer

Operating your business as a limited liability company (LLC) provides you with some of the best asset protection features of a corporation combined with operational and taxation features of a partnership (or a sole proprietorship if there is just one member). Like Subchapter S corporations, limited liability companies can be subject to single income taxation (in contrast with a C corporation’s double taxation at both the corporate and shareholder level). Day-to-day operation and ownership of a LLC, however, tends to be easier because the formalities are less strict than those governing S corporations.

Of course, you should consult with your attorney and your accountant to discuss legal and tax issues before forming limited liability companies or changing the current legal form of your business.