A limited liability company (LLC) is a business structure in the U.S. that protects its owners from personal responsibility for its debts or liabilities. Limited liability companies are hybrid entities that combine the characteristics of a corporation with those of a partnership or sole proprietorship.
In this video, we explain the rules and regulations governing the number of LLCs that one person can have in the state. We also discuss the potential benefits and drawbacks of having multiple LLCs, and offer tips on how to manage and maintain them effectively. Watch to learn more and make informed decisions about your business ventures in Wisconsin.
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Hello, I'm Attorney Thomas Burton and today's question is the following:
"How many LLC's can one person have?"
This question is something that came up recently, wondering if there's a limit on the number of LLC's a person can have and I can tell you here in Wisconsin, there is not a limit on the number of LLC's you can have. In fact, you can form an LLC for any lawful purpose under the Wisconsin LLC Statute.
If you know about an LLC, a limited liability company, the goal of the company is to set up a separate entity, that separates your business assets and liabilities from your personal assets and liabilities. If you have a sole proprietorship, it means there's no distinction between you and the business. All the business assets and liabilities are your personal assets and liabilities and with flow through taxation, the expenses and income of the business flows through, to you. Now the great thing with an LLC is, we can get some business distinction, we can separate the business assets and liabilities from our personal assets and liabilities but we can still maintain flow through taxation, if we want, if it's a single member LLC as a disregarded entity.
The LLC statute was really created to allow small businesses to get the perpetual life of a corporation and that asset protection, that limited liability protection of a separate entity but still maintain some of the simplicity of a sole proprietorship with the flow through taxation where you can file the taxes on your individual tax return.
Now, you can form an LLC with more than one member and then your tax as a partnership, you can still have partnership flow through taxation but you will need to file a separate partnership return, but getting at this question, can I have more than one LLC - the answer is yes and often, it's a good idea because if you have separate businesses, operating separate areas that have their own liabilities inherent in the business, you can take one business and separate it out over here, let's say, you have a lawn care, lawn mowing business with employees, you can keep those assets and liabilities over here and then let's say, you want to start another business, that's unrelated, such as rental property empire over here, you can create a second LLC, one-two-three property rentals LLC and keep that over here. Now the key for you is to maintain separate books and records, separate articles of organization, separate operating agreements and separate bank accounts for each business. If you do that correctly, you can maintain the limited liability protection of each business from the other one.
You may have heard of something called 'Piercing the corporate veil', that is a concept in corporate law where if you do not maintain the corporate formalities, the distinctions of the separate entities, someone seeking to sue you, could say this is a fictional shell and I'm going to go right through to the owner. So that's why it's important, you can use multiple LLC's but it's important to make sure each one is set up correctly in order to maintain that limited liability protection but going back to the question of how many you can have, you can have more than one LLC, in fact it's quite common, if you look in the real estate world, rental real estate, some landlords will form a separate LLC for each property for these asset protection reasons, where they're seeking to keep the assets and liabilities of one rental property, separate from the assets and liabilities of another rental property. That's why sometimes, if you look up the property tax records, you might see 123 Main Street LLC and then 521 Oak Street LLC, could be owned by the same member but they have separate LLC's for each one. As you get into multi-family housing, this is increasingly important and common where one apartment building would be separate from another apartment building.
Now, there is no legal limit on the number of LLC's you can have but just remember, each one you have, you will need to maintain the annual report with the state of Wisconsin, the $25 filing fee each year and make sure, you maintain the records and file the income and expenses on your taxes for each LLC each year.
As you grow larger, if you form multiple LLC's, then you may want to consider a more advanced strategy where you have a corporate holding company, somewhere on the top that owns the multiple LLC's things like that. You can advance as you advance through your business journey but the important thing to remember is there is no legal limit on the number of LLC's you can have at least in Wisconsin It's more about maintaining those LLC's once you have them, in order to make sure they're effective at what you want them to do which is giving you that limited liability protection.
So great question, thank you for asking. Thank you for tuning in and we'll see you next time.
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