Positively Impacting Humanity by Educating, Advising and Representing World Changemakers.


Are Two LLC'S Better Than One?

Attorney Michelle L. Grenier

Focusing on Business, the Whole Business and

Nothing but the Business.

Trademark Attorney, Contract Attorney, Corporation Attorney

Michelle Grenier, Esq., Trademark Attorney, Contract Attorney, Corporation Attorney

Michelle L. Grenier, Esq.
Small Business Lawyer, Trademark Attorney and Executive Contract Lawyer.
Client Review Rating: “Preeminent” (5 out of 5)
 Peer Review Rating:  4.7 out of 5
Michelle L. Grenier, Legal Strategist for Top Growing Businesses, provides information,  guidance and services for small businesses:

Taking small businesses From Startup:

to Operation:

and Exit, Sale or Transfer:

Follow Me

Legal Info for Businesses

Business Checklists

Understanding Agreements

Want to Discuss your Business Issues? Click here to speak to Michelle Grenier and/or schedule a consultation.

Subscribe to our blog

Michelle L. Grenier, Esq.

Business Lawyer, Trademark Lawyer and Executive Contract Lawyer



Want to Discuss your Business Issues?

Click here to schedule a Consultation with an experienced small business corporate lawyer.

Legal Info for Businesses

Business Checklists

Understanding Agreements

Common Question If my business plan includes two relatively distinct business purposes/activities (for example, one offers a service and one will offer products after the Research & Development stage) and I will be using a different trademark for each purpose/activity, should I operate both activities under one legal entity [hereinafter referred to as an LLC] or establish two LLCs, where each business activity will operate under a separate LLC?

General ResponseOften establishing two separate LLCs is recommended in such cases, for reasons including the following (Note, I use the analogy of two hypothetical persons (Joe and Larry) for clarification purposes only):

  1. Advantages to establishing and operating the two business activities separately, each under a separate LLC:
  2. Separation of Liability.  One of the major advantages in having two separate entities for two business activities include, separation of debt and other liabilities.  Generally, debts and other liabilities of one LLC will not be held against the other LLC.  For example, if a customer/client of ABC, LLC is injured and alleges that the injury is the result of business activities of only ABC, LLC, then, generally speaking, XYZ, LLC's assets (at the time and future assets) are not at risk of attachment, seizure and sale to satisfy a judgment against ABC, LLC (and vice versa).  Note, in many cases, judgments may be executed up to twenty years from the date granted, i.e., after you build your empire.
  3. Separation of Performance Issues.  (Using the analogy of people) If Joe becomes ill and can't function for a while, that does not effect Larry's ability to function.  Similarly, such is the case with two LLC's.  That is, if one LLC cannot operate for some reason, the other continues to have the opportunity operate.  If Joe needs to file bankruptcy or defaults on a lease or contract for some reason, neither Joe's bankruptcy nor Joe's defaults would effect Larry.  The same would apply with separate LLCs.  That is, the bankruptcy or default of one LLC, generally would not affect the other LLC.

The opposite could also be true.  If there is only one LLC for both activities and one activity fails for some reason (e.g. bad timing, economy, mistake), the one LLC may fail, even if one activity was revenue producing - the debt accumulated by the other activity could take down the entire dual-activity LLC.

Also note, unlike corporations, there are NOT a lot of formalities required with LLC's. Thus, if you have two LLC's you may NOT need to think about being required to have two annual meetings (one for each LLC), keeping minutes of meetings of each LLC, etc.

In addition, in the tax arena generally, if there is only one owner of each of the LLC's, the LLCs may be disregarded entities for tax purposes and thus you may not be required to file a separate tax return for either LLC (this would need to be confirmed with your tax professional with regard to your particular situation).

  1. Some issues that you may find to be disadvantageous to having two entities (rather than one) are as follows:

Some formalities that you will need to do for both both LLC's  are generally, as follows:  (i) file two Annual Reports once a year; (ii) maintain two separate bank accounts (and no co-mingling of funds);  (iii) one LLC should not control or give the appearance of controlling the other LLC; (iv) clearly indicate separateness of the LLC's and clearly represent allocation of responsibility for the business activity to the appropriate LLC, in marketing,  etc.; and (v) otherwise treating each as a separate legal entity.

With regard to "treating" the LLC's as separate entities, if you think of it like two separate persons it may be helpful.  For example, if you were entrusted with asset management for Joe and Larry, you would not pay "Joe's" expenses out of "Larry's" bank account -- likewise, you would not pay ABC, LLC's expenses out of XYZ, LLC's account.    Also, if part of the plan is that the income of one revenue producing business activity will assist with the expenses of the other business purpose (for example, ABC, LLC revenue helps XYZ, LLC until the XYZ, LLC grows into a revenue producing business), there are ways to make this happen, while allowing for independence of the two LLC's.  However, note, if it is not done properly you will risk not destruction of separation of liability.

Want to Discuss your business Issues?

Consult a competent experienced Trademark Lawyer to discuss your specific situation. 

Tags: trademark registration, intellectual property rights, trademark, trademark lawyer, trademark law, trademarks, intellectual property, trademark attorney, Intellectual Property agreement, license trademark, license intellectual property

Similar posts
  • Understanding contracts.Understanding contracts.  What is a contract? A contract is a promise or set of promises, for breach of which the law gives a remedy, or the performance of which the law in some way recognizes as a duty. Risk. The biggest risk is not having a signed comprehensive contract; the second biggest risks, [...]
  • Website CompianceWebsite Compiance One of the first things new businesses do, typically is, create a website.  Business owners should understand that it is important to have proper web site content including, appropriate terms of use, privacy policy and copyright notices. This content protects your rights, as well [...]
  • Understanding the Letter of CreditUnderstanding the Letter of Credit      One of the biggest risks in using a Letter of Credit, is not fully understanding the terms.  Clarification can be obtained easily, with proper counsel.
  • What are Trademarks, Copyrights and Trade Secrets?What are Trademarks, Copyrights and Trade Secrets? PROTECT YOUR INTELLECTUAL PROPERTY RIGHTS Intellectual property can be a company's most valuable asset and the acquisition, transfer, license or right to use such intellectual property is often an essential element in many business transactions.  [...]

Trademarks, Contracts, Corporations A-Z Helpful Information

Posts by Tag