Can I Have More than One LLC?

By Christine Funk, J.D.

Can I Have More than One LLC?

By Christine Funk, J.D.

An individual can be the owner of more than one limited liability company (LLC), but limitations often exist on ownership and membership interests. You must observe these limitations to comply with state and federal laws.

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You can acquire an LLC in two ways. First, you may create one either on your own or as part of a group. Second, you may acquire a membership interest in an already formed business. The limitations and restrictions discussed below apply to both situations.

Forming an LLC or Joining an Existing Business

Forming an LLC is a method of structuring a business to protect your personal assets. When it is formed with a single owner, it is referred to as a single-member entity, and those with more than one owner are multiple-member entities.

When you form an LLC, you must meet certain legal requirements. You must choose a unique name, and designate a registered agent. While many businesses can share the same designated registered agent, such entities cannot share the same name.You must also file the articles of organization with the state. Finally, you should also create an operating agreement that will include a variety of information, including the purpose of the company, owners, percentage of ownership interest, and more.

Before you join a multiple member LLC, it is a good idea to review the operating agreement of that company, as it may have requirements for you to meet before you can acquire a membership interest. Requirements may include a monetary investment, the contribution of property, a commitment to future contributions of cash or property, or an agreement to provide time and talent or another service for the business.

Conflicts of Interest and Tax Consequences

Although there technically may be no limit on the number of LLCs you might be a member of, there may very well be restrictions of ownership based on conflict of interest. Members owe the business a fiduciary duty; in most jurisdictions, this includes a duty of loyalty. Conduct in opposition with the duty of loyalty, such as competing business activities or self-dealing, are prohibited. Thus, you should carefully review the goals of all businesses currently held before becoming a member of another entity to make certain there are no conflicts.

The IRS classifies multiple-member entities as partnerships for tax purposes and treats single-member companies as sole proprietorships. The business has the option, however, of electing corporate tax treatment. Consequently, you may find yourself filing a Schedule C attachment for a single-member entity, filing a Schedule K-1 for an LLC subject to partnership taxes, and paying income taxes on any dividend distributions received from the business that have chosen corporate tax treatment. Being a member of multiple companies might make your tax situation quite complicated.

As you consider forming an LLC, you should research and review the requirements for owning one in your state. Always read through and consider a company's articles of organization and operating agreement before buying a membership interest, especially if you're already a member of another business.

This portion of the site is for informational purposes only. The content is not legal advice. The statements and opinions are the expression of author, not LegalZoom, and have not been evaluated by LegalZoom for accuracy, completeness, or changes in the law.