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Ask HN: pros and cons of running multiple startups (webapps) under one LLC?
You'd think this is something that has been discussed on HN or another startup forum, but I can't seem to find a combination of search keywords that yields anything useful on the topic.
I've been a moonlighting entrepreneur for about 18 months, and have a single, slightly profitable webapp/startup. I am a solo founder and the only contributor/employee. The company is a registered LLC.
Since that app requires little ongoing maintenance, I've decided to branch out and create additional, unrelated businesses/apps. I am thinking that it would be best to create a single "parent" LLC that owns and operates these various "brands" possibly under a DBA.
The advantages, as I see it:
* The simplicity of running one LLC, having one bank account, etc. instead of 3 to 5.
* Economy of scale from things like shared hosting, shared payment gateways, shared legal and accounting support, etc.
* Avoiding additional (admittedly minor) fees from multiple filings.
* Fewer qualms about things like cross-promotion between the sites.
I understand that some of the drawbacks under this scenario are:
* The "limited liability" umbrella would extend across all the businesses, so that if Brand A gets sued, Brand B's assets are at risk. I can live with that risk (although if there were an easy way around that I'd certainly take it). I guess maybe a Series LLC would work around that problem? They don't have those in my state but they do in Delaware, of course.
* It may be more difficult or complicated to sell one of the businesses. I hope that can be mitigated by proper accounting, but I don't know that for sure or exactly how difficult that is in practice. For example, would it require independent bank accounts or is it sufficient to maintain independent general ledgers in my accounting?
In case it matters, I expect that most of these businesses will be a one-man shop with the occasional contractor but probably not actual employees. I also expect to run the businesses for profit rather than seeking to sell or flip for profit. But I'm not ruling anything out.
Am I missing something that makes this a terrible idea?
- cincinnatus 15y agoAn app is not a startup and it bothers me to no end that people use these interchangeably. A one man shop is also not a startup. Not being a startup in these cases is a good thing. A single LLC is completely sufficient for your purposes. If and when you take on a partner in one of these apps in hopes of building a company around it you can form a second LLC to maintain a clean ownership structure and give a place for additional people to vest some shares over time.
- bgg 15y agoThanks for your input Just for the record: I don't think I used the terms "app" and "startup" interchangeably, I was specifically trying to distinguish "profitable business" from "webapp". Also, we've all got our pet definitions of words, and HN does around words like "startup" in particular, but HN mythology notwithstanding, any new business is by definition "starting up". Even under the "compress your working life into four years" notion that is popularly tied to the word "startup" here, I'm not sure how "single founder" implies "not a startup." Hope that doesn't come out wrong. I sincerely appreciate your feedback.
- mattblalock 15y agoShare it all under an umbrella LLC, if something starts getting big, hire a good lawyer.
- brudgers 15y ago<IANAL> so I would start by suggesting speaking with one. But generally, when there is liability it makes sense to shield your assets, and therefore it makes sense to operate each asset within it's own LLC. Depending on the laws of your state, another LLC can own a portion of a second LLC, i.e. you might set up a holding entity to own the other entities. Keep in mind that there is some case law that an LLC with only one member may pass through liability </IANAL> My observation over the years has been that setting up and running multiple entities is something many successful business people do without hesitation. Typically they use accountants to handle the messy details and bookkeepers to track them.
- Shooter 15y agoI do it all the time. - A single LLC is probably optimal for what you are suggesting, unless one or more of the projects you will be pursuing is something that invites litigation. You would definitely want to have a separate LLC for anything that is extremely risky or that is in a litigious industry (healthcare, etc.) If your first app is just "slightly profitable", I wouldn't worry about it that much. If you add other memmbers/managers in the future you can always restructure the ownership and compensation ratios, etc. - LLCs are amazingly flexible. - I've used series LLCs several times (in IL and DE), and it was very helpful in a couple of cases and a complete clusterfuck in another. Find a great lawyer if you opt to go that route. You DEFINITELY have to use separate bank accounts and ledgers for every series if you want to get any of the advantages of the Series LLC structure. Just trying to open Series-specific bank accounts can be an issue, surprisingly. I would only use a Series LLC again for VERY specific purposes (mutual fund companies, etc.)
- brudgers 15y ago<IANAL_just_paranoid>I recommended a separate entity because of the contract coding. Protection from copyright claims with contractors is only as good as one's attorney, and therefore any contract coding potentially exposes the other enterprises within a settlement. The perfect example would be reuse of elements developed under contract for one endeavor being reused on another project which took off. </IANAL_just_paranoid>
- gregpilling 15y agoThe LLC owning all the brands would be fine, if they are all web apps. Web apps typically have little liability risks. I have put several brands under one LLC, and then used the 'class' feature in Quickbooks to give each brand each its own P&L. I keep my building in a separate LLC from the rest to protect it. I feel there is enough liability in owning a business with slip/fall type lawsuits to segment the assets, since we deal with the public (non-tech business). The ability to separate the financials with 'class' was the most useful part. Split LLCs force you to do this because they by definition needs their own P&Ls, but make it hard to figure out what to bill for each business. For example you may have an accounting expense - which LLC do you bill it to? Split evenly amongst the apps, or proportionate to what each earns? If you have one LLC with many brands, if you want to sell one off then the 'class' segregation will let you show a potential buyer how profitable it is by itself. notes: I am only familiar with QB, I am sure other software does similar functions