Me an my brother’s are looking to start an LLC as of the new year, and work on acquiring clients while we all will retain our full time jobs as well.
My question is would it be better to enter a multi-member LLC, or for each of us to aquire individual LLCs and one LLC be the main operating entity, and the others recieve payment through a 1099?
I feel the Seperate LLCs (while startup would cost more) benefits of being able diversify our individual entities would be worth it.
Any thoughts on this? Or any other information, suggestions, or tips are appreciated.
Please talk to a CPA or Lawyer about this but what it sounds like to me is that you want to keep you and your brothers liability separate from the business. One LLC with a new business checking, saving, CC, etc, should be fine but if you truly want to keep the business separate from your own money/liability then you should look into an S(maybe c) Corp. This structure basically take all profits and loses and passes them through the business and then pays you a as an employee of the business. There is lots of things to look at in any business structure but with a S Corp you should only be liable for the amount each investor contributes. Basically if you throw in 100k and your brother puts 50k then neither of you are on the hook for the full 150k.
Again look into each and then talk to a professional before you make a decision. 1-5k now in fees will save you a lot more later. Also, 100% get an Operating Agreement vetted by a lawyer before you do anything. They will ask you shit you will never think of like if you’re in a coma for 30 days who does your authority go to. Trust it’s better to get this out of the way now then if/when shit goes wrong.
What is the main goal behind the multiple LLCs: to keep separate books for your business vs the whole, or liability protection from the other partner?
TIP Getting into business with anyone - family, friends, stranger - should not be done so without an Operating Agreement (OA). OAs offer protection to each partner, and outlines what actions the partner or partnership can do in any situation, i.e. do you both have to approve large purchases over $5k, what if a member’s capital account is negative, who is the managing member?
Edit to add tip.
What is the vertical the business will be in? Multi member LLC with and Operating Agreement would be my suggestion for the sole factor of building that corporation’s EIN based credit. Having all parties involved working under one EIN will shortcut the process to get the business cash-flowing on its own two feet, so when money is needed for additional growth, none of you are needing to sign personal guarantees for it. That holds true for even CCs. But all dependent on what type of business it is