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Ask a Lawyer -- LLCs
LLC Question 158
Question:
I formed a LLC in the state of Tennessee for a contractiing business. I have an opportunity to buy another business that is not related to contracting. Can I operate the new business under the existing LLC or will it be best to form another LLC for the new business?
Response: Can you operate two distinct businesses under one LLC? Generally, this can be done. One caveat is to check the articles of organization and/or LLC operating agreement to see what types of business enterprises the LLC is authorized to engage in. Typically, the articles and operating agreement state a specific business purposes but, also, contain vague language referring to other authorized business categories. It is easy to amend an LLC operating agreement. Articles of organization are amended through filing articles of amendment with the state.
But is there a reason not to run two separate businesses under a single LLC? The major reason to have to two separate LLCs is to compartmentalize liability from each business. If one business were to be named a defendant in a lawsuit or become unable to pay it's debts, the existence of two LLCs would help to limited exposure to claims to the assets of the business which generated the claim. With one LLC, debts or judgments from the contracting business would be collectible against the assets of the new business (and vice versa).
Submitted: 12/20/2007; Dennis, Tennessee
Response: 01/01/2008; JJR
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