J.K. Lasser's Small Business Taxes 2013: Your Complete Guide to a Better Bottom Line

When to Run Multiple Activities within One Business

It is not always better to use multiple businesses. Sometimes a single entity can meet business needs, with no tax disadvantages. Here are some reasons to opt for a single entity:

• Savings on legal and accounting costs. A single entity cuts down on the cost for entity formation as well as ongoing costs for accounting and tax return preparation. In Delaware, Illinois, Iowa, Nevada, Oklahoma, Tennessee, Texas, Utah, and (to a lesser extent) Wisconsin, state law permits a single LLC umbrella, called a series LLC (also referred to as a cell LLC), for a group of individual LLCs. In this type of organization, the debts and liabilities of each LLC remain separate from those of the other LLCs. But using a master LLC makes things administratively easier and less costly.
• State tax savings. Where state law imposes a tax, a single entity reduces franchise or other annual tax costs. For example, California charges an annual fee for LLCs (in addition to the annual fee on their revenues), so using separate entities can get pricey.