It’s crucial to comprehend the distinction between a DBA and an LLC before moving on to the procedure of adding a firm to your LLC. The term “doing business as” (abbreviated DBA) refers to a false name that a company uses to conduct business. In contrast, an LLC (short for “limited liability company”) is a type of legal entity that shields its owners from personal liability.
A DBA might be helpful for companies that desire to conduct business under a name other than their legal name even while it does not provide any legal protection. If your LLC is called “Smith Enterprises LLC,” but you wish to run a restaurant called “Smith’s Cafe,” you might need to obtain a DBA.
A sole proprietorship is a company held by a single person who is liable for all debts and liabilities of the company individually. A DBA, on the other hand, is just a made-up name that a company employs to conduct business. Although a sole proprietorship can use a DBA to conduct business under a different name, it offers the owner no legal protection.
The sort of business structure you select will determine the tax repercussions of adding a business to your LLC. An LLC has the option of being taxed as a partnership, S company, C corporation, or sole proprietorship. Small firms frequently choose a S company because it enables the proprietors to forego paying self-employment taxes on a percentage of their revenue.
It’s crucial to keep in mind, though, that the tax ramifications of a S company can be trickier to understand than those of an LLC. S corporations have stricter rules and more paperwork requirements than LLCs.
You are not regarded as self-employed if you own a S corporation, to be clear. Instead, you must pay yourself a fair compensation as you are regarded as an employee of the S corporation. Your salary will be subject to payroll taxes, but the amount of your income that is delivered as a dividend will not be subject to self-employment taxes.
Let’s get started with the procedure for adding a business to your LLC now that we have gone over some of the essential terminologies and ideas.
1. Select an Organizational Structure: The first step is to choose the appropriate organizational structure for your new company. The kind of business you’re launching, your responsibility worries, and your tax objectives will all play a role in this.
3. Acquire any Required Licenses and Permits: Depending on the kind of business you’re beginning, you might need to apply for licenses and permits from your state or local government. Update Your Operating Agreement: If your LLC currently has an operating agreement, you must amend it to include your new business.
4. This could entail expanding the membership base or altering how profits are distributed. 5. Open Separate Bank Accounts and Conduct Separate Bookkeeping: For accounting and legal reasons, it’s crucial to keep your new firm and old LLC separate. For each firm, this entails setting up a separate bank account and keeping separate books.
Expanding your business’s products and revenue sources can be accomplished by incorporating a new company into your LLC. To make sure that your business is legally registered and protected, it’s crucial to take the right legal and financial precautions. You can position your new company for success by taking the time to comprehend the procedure and working with an experienced specialist.
The property in an LLC is owned by the business rather than the individual owners or members. As a result, the company has the authority to acquire, dispose of, or transfer real estate as may be required for business needs, but none of the members are considered to be the actual owners of the property. Nevertheless, depending on the provisions of the LLC operating agreement, the members can be entitled to a share of the company’s earnings or assets.