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Let’s say someone is a real estate agent, and they sell homes under their main business. They also have a property management side business. They should have these under two different entities because if something happens with a tenant under the property management side and the agent gets sued, they don’t want their commissions on the realty side up for grabs. In order to secure a business, I advise owners with multiple companies to have them under multiple entities. By adding multiple entities, we create layers that protect each area of your business. I’ve seen situations where a business owner is forced to pull money from their personal retirement account to cover the fallout from a suit related to a different business that was listed under the same entity as their main company. This is not the situation you want to find yourself in, and the best thing I can recommend is to establish multiple entities from the get-go. You might wonder why a lawyer is so important to the process of creating another entity when you can do it online. Your structure might be straightforward enough that you can use the forms you’ll find on LegalZoom, but if you want to ensure you’re setting up a corporation in a shatterproof way, then it’s worth the investment to include your business lawyer in the process of establishing your entities. We’re able to give you your options and share all the information you need to make the best call for your business and shoo the dragon away before he can even approach your castle.
KEEP THE DRAGON AT BAY THE BENEFITS OF HAVING MULTIPLE ENTITIES
Sometimes, when I think about my role in showing business owners the holes in their defenses, I imagine myself as a modern-day knight aiding the king. (I just wear suits instead of chain mail, which I’m pretty sure is more comfortable.) I ride into their castle and announce that the enemy is at the gates or that a dragon is flying their way. I give the king all the information. Then, it’s up to them to make the call on how to protect their castle. Okay, maybe it’s a bit of a dramatic comparison, but I’ve seen enough dragon raids that I feel the need to alert business owners of the peril their businesses are in when they don’t set them up properly. One of the common “dragons” that business owners run into is speeding through the entity formation process. Even though they have multiple companies, they put everything under one entity. This situation can put you in hot water down the road.
– Scott Reib
P.S. If you want to form your entity without an appointment or by using LegalZoom, then we have an "Entity Formation" page that includes all the forms you’ll need, organized by state and type of LLC. Find our easy to use forms at Linc.REIBLAW.com/product-selection-formation.
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