Multiple Business Functions In One LLC?

Question

Hi all,

I currently have an LLC from a prior business where I sold things on eBay. The business is still active; however, I'm not ordering any new inventory and plan on stopping operations when all my current inventory is sold. My question is, can I use my existing LLC to hold real estate investments even though it is listed with the state as a company which does e-commerce? I would likely do a DBA or rename the LLC since the current LLC name doesn't make much sense for a real estate company.

My next question would be if I keep the LLC as is and just do a DBA -  should I keep a separate set of books for the DBA? or does it need to all be in the same set? I currently use Quickbooks online for the eBay part of my LLC and I worry that if I start putting in real estate transactions it's going to make the chart of accounts confusing. I also have a bank account and credit card using the current name of the LLC.

I'm happy to provide additional details if needed. Just looking for additional guidance. I live and operate in Maryland, btw.

Thanks!

Trevor

Frank Chin · Answer

If I were in your shoes, I would terminate the LLC you currently use for Ebay, and if you choose to use an LLC for your real estate holdings, start a new one from scratch. Real estate is very different from Ebay.

Everyone's situation is different. In my case, I don't use an LLC for my real estate holdings. but use an LLC for an active business, an S Corp. with a DBA for 2 different businesses, and a C Corp, since closed, for real estate management.

In my view, closing one and opening another would involve paperwork and fees, but keep your accounting much cleaner, as you probably agree. For my active businesses, I have sales tax certificates for the different entities. I have employees in my LLC, and prior to Obamacare, if I get health insurance for myself, I have to obtain it for my employees, hence the management under the C Corp with health insurance where there are no employees. So for many other reasons, including unemployment insurance, workman's' comp it's cleaner to keep things separate than one massive accounting mumbo jumbo.

One other reason for closing a business after a certain period of time is you'll won't be liable for things that occurs in the closed business, that you won't have people getting after you.

Ned Carey · Answer

@Trevor White  It is generally considered good practice to separate different  risks into different companies. The risk of being an eBay seller is different than being a landlord, which in turn is different then being a flipper. In MD it is actually cheaper to start a new LLC than it is to renew it every year.  About $75 to create and it is about $300 to continue every year.

Since you want to use a different name anyway there is no reason not to create a new LLC.  If you think saving $75 is a reason you probably shouldn't be in business.

Bryce Litwin · Answer

Start a new LLC, it's cheep insurance...

Trevor White · Answer

Awesome -  thanks for the feedback everyone! It sounds like it might be worth meeting with a local lawyer and/or a CPA. If anyone has any recommendations for either in the Baltimore area, I'm open to suggestions.

Thanks!

Jeff V. · Answer

Trevor,

I think you can find most of your answers in this article on LegalZoom.

As far as your question "My question is, can I use my existing LLC to hold real estate investments even though it is listed with the state as a company which does e-commerce?"

Not sure, but you may have to file an amendment with the state to update your business type.  I would talk to a CPA on that one to be sure.

Your Question "My next question would be if I keep the LLC as is and just do a DBA - should I keep a separate set of books for the DBA?".

You need to keep one continuous set of books under the legal name of your LLC.  Regardless if you add a new line of business or not it is all under the same company.  If you wanted to keep it separate you could have a different class for each operation, but all under the same books.

Regarding the chart of accounts...  Once you have a full year with no transactions for the ebay business you can start making the ebay related chart of account categories inactive to hide them which will clean up the chart of accounts.

So short answer is I believe it's possible to do everything under your existing LLC, however It increases your liability and is not going to be a very clean transition on your books.  It may be worth just starting a new LLC fresh.  I would talk to a CPA on the topic and get the "Should I" answers to your questions.

Jeff V

Natalie Kolodij · Answer

I'm not an attorney so pleas speak with one...

But recently at a seminar where myself and an attorney spoke he was saying that if you re-use a LLC in that way it keeps the liability from the previous company open.

So if someone sues you for your Ebay store they can now take your real estate...doesn't sound good to me.

I'd shut it down and pay $200 for a new one (or whatever the cost is in your state).

Multiple Business Functions In One LLC?

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