Is it OK if a solo owner/operator incorporates one small company (LLC) and uses it for unrelated businesses like software development, book publishing, clothing etc?

In general, most states allow you to operate any business activity under one LLC as long as it is for lawful activity.


Scenario 1 - All under one LLC

From tax & accounting point of view, the costs will be lower if you keep all your businesses under one entity. We normally recommend maintaining books by legal entity. So, in this scenario, you will only have one company to manage accounting. So, tax & compliance will be easy. This model works fine as long as all business lines are just in a start-up phase. Also, this works fine as long as businesses do not require any special industry license eg: You operate as a book publishing and also as an insurance agent (which requires license)

Scenario 2 - Multiple entities

As your businesses grow, it becomes more difficult to manage them all under one LLC. So, at some point, you will need to segregate by business line. The advantage of this model is you will be able to track your business line profitability better than the single entity model. This can help you with strategic decision making. You can decide to close unprofitable lines or grow profitable lines. The disadvantage again would cost as you now have to manage multiple entities.


** Our response to a question asked on quora.

Posted In: Company Formation

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