Business Structures and How to Start a New Online Business, From EIN to LLC Filings
Today young entrepreneurs are earning by venturing various types of online businesses. While starting an online business you will have to decide about its structure as it will help in filing the income tax returns as well as applying for EIN.
The most common types of business structures include the sole proprietorship, partnership, corporation, and a Limited Liability Company or LLC all of which are run as per the laws of the state. You can choose from them after considering their legal and taxation requirements.
But most of them prefer to start multiple businesses these days to create more earning opportunities. In this condition it becomes necessary to know the best ways to manage different ventures suitably to run them successfully.
For instance a caterer can start as a part time copyright editor or a restaurant owner can start a wine shop along with it. These multiple businesses can be covered either under one corporation or by forming a separate LLC for each business. They can be structured as per legal as well as marketing perspective.
Structure of multiple businesses on legal perspective
While starting multiple online businesses on legal perspective then you can start them in three ways as briefly described here under. Though all the options have their own pros and cons but you can choose from them as per your own requirements.
Type 1: Start each business as a separate LLC or Corporation or LLC
In this option you will have to form separate LLC or Corporation for each business like separate LLCs for restaurant as well as wine shop. This seems to be easy to handle them separately but it can be rarely suitable for every business owner.
The main drawback of this option is enormous paperwork as you will have to fill up a number of forms for the purpose of taxation and administration of each structure. It can be suitable for the businesses containing potential risky liabilities.
In this option you can start by creating one LLC or corporation and register other businesses with various fictitious names known as DBA or Doing Business As within the same country or state.
This option is good for doing various types of independent businesses with different names and branding for their particular market even if they are legally protected by the main LLC or corporation. It will reduce paperwork enormously as the income of each venture will be filled as the income of the main corporation or LLC on a single form.
Type 3: Start with one LLC or corporation and add other businesses under it as LLC or corporation
According to this option you can create a holding corporation or LLC and include multiple businesses in it as separate LLC or corporation. This option is normally adopted by an established business when it starts a new business by funding it. But in this scenario legal and taxation paperwork becomes more complex.
Structure of multiple businesses on marketing perspective
While structuring multiple businesses online from marketing perspective you can start it in two ways.
If two businesses appeal and relevant for the same customer like opening a wine shop along with a restaurant can relevantly appeal to the same customer, then both the businesses can share the same brand name.
On the other hand, while structuring multiple businesses by including different types of businesses like in case of becoming copyright editor along with a caterer, then you will have to use different brand and business names as well as websites for each business.
So before starting a multiple business you should consult with a taxation advisor to find the best business structure you.
Applying for a new EIN
A new EIN or Employers Identification Number is required by businesses when there is a change in their structure or ownership but not in case of change of name of the business.
Every type of business whether it is a sole proprietorship, partnership or a corporation has to apply for new EIN whenever any person enters into or leaves the business structure. But in case of LLC you need not apply for new EIN as each entity participating in it is considered as disregarded entity.
Thus after considering the information provided in this write-up one can easily structure an online proprietorship, partnership, corporation or LLC business and file application for new EIN as per its requirements.