You know what’s better than owning one small business? Owning two — or maybe even three or four! If an entrepreneur has an existing, successful startup and is passionate about creating products or services for other industries, it’s worth making the leap into establishing multiple businesses. However, before you begin the process all over again, it’s important to note that you might not be able to do everything exactly as you did the first go around. From creating additional bank accounts to whether or not you should keep startups under the same entity, here are a few compliance details for entrepreneurs to consider when starting multiple businesses.
1. Separately incorporate each new business.
As tempting as it may be to house both companies under the same formation umbrella, like an existing LLC for example, it’s actually a risky practice for both businesses involved. One company can negatively impact the other if a business goes under or carries too much debt — and the last thing an entrepreneur wants is their startup hindered early on.
When starting an entirely different business, it’s a smart move to incorporate it separately so as to not let the risks and liabilities impact your current business. The reputation of the business aside, this is also beneficial for the reputation of the owner. Professionals with professional licenses like contractors, doctors, and lawyers have licensing boards that limit what they can do under the umbrella of their business including who can be the owners and what they can offer. It’s neither a wise business idea nor within the licensing board’s rules to co-mingle businesses, so it’s better to separate from the start.
2. Avoid co-mingling finances.
When running a couple of businesses, the best financial advice is to keep everything separated. If all funds are mixed together, there could be confusion regarding which business had what expenses or overall revenue performance.
In addition to incorporating each business separately, keep finances separate with different bank accounts and accounting books. In the event that you decide to sell one of the businesses, you will be required to present a comprehensive look at the company’s performance. The more separate the finances are, the more you can provide prospective buyers with the accurate value of the business.
3. Protect intellectual property assets with trademarks.
While you’re incorporating your next business and getting its finances in order, you will also need to conduct a search and file for a trademark application for the new startup name, logo, or design. Doing do allows you to claim the name and protect that unique business identity as well as keep anyone else from plagiarizing or copying the assets.
What should entrepreneurs do if they’re interested in a business spinoff (like starting an initiative for a new service or product that spins off of an existing popular one)? It’s a new product offering, so there’s no need to form a separate business for it. Regardless of whether you start up a spinoff or create a new business altogether, maintain the hard work and passion you put in for both of them without letting either one fall to the wayside. If you’re not sure what you need to do to make that happen, take a cue from Richard Branson, founder of Virgin. He says that in order to run a business, entrepreneurs must master how to engage their target audience, pay attention to cash flow, look after their team, and highlight their unique selling point. Branson advises that once you’ve been able to apply those skills to one business, you can apply them to the next. It’s a little like a domino effect for every new business you start up from here on out!
Deborah Sweeney is the CEO of MyCorporation.com which provides online legal filing services for entrepreneurs and businesses, startup bundles that include corporation and LLC formation, registered agent services, DBAs, and trademark and copyright filing services. You can find MyCorporation on Twitter at @MyCorporation.