If you catch the entrepreneurship bug, you might find yourself wanting to run more than one business. While it’s possible for business owners to run multiple enterprises, it’s important that each one is properly structured and registered.
In this article, we guide you through different methods to legally structure multiple businesses.
Can you have multiple businesses under one roof?
It’s entirely possible to operate multiple businesses under one roof in Canada. This practice can take several forms, like creating multiple divisions within a single corporation, creating distinct corporations under a holding company, or registering different trade names under a single corporation.
However, while it’s legally feasible, it can require planning and organization to adhere to legal, accounting, and regulatory requirements. Let’s take a look at some of the benefits, drawbacks, and special considerations of operating multiple business entities under the same roof.
Is it a good idea to have multiple businesses under one roof?
Running several businesses under one roof is an appealing idea for many entrepreneurs: it provides the opportunity to diversify business activities, generate more revenue, and fulfill more ambitions.
It can be a good strategic move for those looking to optimize resources while tapping into different markets, but running multiple business ventures is not without complexities. Balancing the needs of different enterprises and ensuring their individual success can be a challenging task. But with a bit of planning and organization, it can be the right approach for some business owners.
What are the benefits of running multiple businesses?
There are several perks to running more than one business.
One of the main benefits is income diversification. Much like a diversified stock portfolio, if one venture encounters difficulties, the additional businesses help mitigate the risks and costs.
Running multiple businesses can also make it possible to share administration resources, staff, and premises, which can significantly reduce overhead costs. Depending on the business activities, there may also be opportunities for synergies between multiple enterprises. For example, one business might provide services or products that another needs, reducing supply costs.
If the businesses are related or complementary, shared marketing efforts can enhance market reach, and cross-promotion can drive customers from one business to another, increasing profitability across the board.
What are the drawbacks of running multiple businesses?
Running multiple businesses isn’t for everyone.
The increased administrative tasks can be overwhelming and time-consuming. Financial management also becomes more complex, requiring separate accounting for each business, even if they operate under a single entity.
There’s also the risk of spreading yourself too thin, leading to a lack of focus that might impact the performance of all your businesses.
Finally, financial issues in one business could potentially impact the others, especially if they aren’t legally distinct entities. If you’re going to run multiple businesses, it’s important to consider these potential drawbacks and have strategies in place to mitigate them.
What’s the best way to legally structure multiple businesses?
The optimal legal structure for running multiple businesses depends on several factors, including liability considerations, taxation, and administrative complexity. Let’s take a look at three approaches to consider:
Create individual corporations
Establishing each business as a separate corporation provides a high level of legal protection and separation since each entity is distinct. This means the debts and liabilities of one business don’t affect the others. However, this approach requires separate filings, fees, and records for each entity.
Put DBAs under one corporation
Running multiple businesses under one corporation, each with a different trade name or “Doing Business As” (DBA) registration, can be an efficient and cost-effective strategy. In this structure, the corporation is the parent company, and each trademark is a branch or division under that entity.
To establish a DBA, you simply register a trade name in your province. This process is simpler and less costly than forming a new corporation for each business.
One of the key benefits of this approach is administrative simplicity. Because there’s only one legal entity, there’s just one set of corporate filings, fees, and tax returns, and you can consolidate administrative functions like payroll and accounting. It also enables easy resource sharing among the businesses, potentially leading to cost savings.
However, given the lack of liability protection between lines of business with this approach, careful management is required to mitigate any potential risks.
Create a business under the holding company
Establishing a holding company to own other corporations is another viable strategy for running multiple businesses. A holding company is a type of business entity designed specifically to own assets or shares in other companies, rather than conduct its own operations.
In this structure, each subsidiary company is a distinct legal entity, which means it has its own liabilities and tax obligations, separate from the holding company and the other subsidiaries.
This approach provides a balance between the protection offered by individual corporations and the administrative simplicity of a single corporation with multiple DBAs. While each subsidiary must maintain its own records and file its own taxes, the holding company can manage overarching financial and administrative tasks.
Running multiple businesses under one roof can present several advantages including income diversification, cost-sharing, and expanded market reach.
However, doing so can come with increased administrative demands, the potential for a lack of focus, and the risk of financial issues spreading across businesses.
When structuring multiple businesses, options include creating individual corporations, putting DBAs under one corporation, or creating businesses under a holding company. Each strategy has its benefits and drawbacks, primarily concerning liability, taxation, and administrative complexity.
How to structure multiple lines of business FAQs
How can I run three businesses at the same time?
You can run three businesses at the same time by structuring them as separate corporations, corporations held under a holding company, or as DBAs—or trademarks—of a single corporation. Efficient management and delegation can help you successfully run three businesses.
How do you structure a group of companies?
A group of companies is typically structured through a holding company. The holding company owns the majority of shares in each subsidiary corporation, providing centralized control while keeping each entity legally distinct. This structure can offer tax advantages, limit liability, and facilitate the sharing of resources among companies.
What is a multi-company structure?
A multi-company structure involves one parent company—typically a holding company—that owns multiple distinct business entities. Each subsidiary operates as a separate legal entity with its own operations, liabilities, and tax obligations. This structure enables diversification, limits liability, and facilitates centralized control, but it also requires careful management to ensure regulatory compliance and operational efficiency.
This article offers general information only, is current as of the date of publication, and is not intended as legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. While the information presented is believed to be factual and current, its accuracy is not guaranteed and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the author(s) as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by RBC Ventures Inc. or its affiliates.