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Three-Ring Circus

What you need to juggle several startups at once.

Question:I'm just starting out in business and want to run two or three different businesses simultaneously until I see which one works best. Do I have to have a separate corporation or limited liability company for each business?

Answer: Probably not, since a corporation or LLC can operate under multiple trade names. Here are the steps you do need to take:

1.Form a corporation or an LLC under the name of the parent company.

2.File a "certificate of assumed name" with your secretary of state's office for each business name your corporation or LLC will be using.

3.Get federal and state tax ID numbers for the parent company only--not each business.

4.Open a separate checking account for each business as [name of parent company] doing business as [business name]. Make sure cash and checks are deposited into the correct accounts and keep separate books and records for each business.

If you run your businesses out of different brick-and-mortar locations, it might make sense to form a separate corporation or LLC for each business, so if someone slips and falls at one location, he or she won't be able to reach assets at the other locations.

Similarly, if one of your businesses is, by its nature, extremely prone to lawsuits (for example, running a children's day-care center), you should consider forming a separate corporation or LLC for that business. Also think about taking out a huge policy of liability insurance for that business, so a judge isn't tempted to pierce the corporate veil and expose your other businesses to liability.

Cliff Ennico is a syndicated columnist and author of several books on small business, most recently Small Business Survival Guide. This column is no substitute for legal, tax or financial advice, which can be furnished only by a qualified professional licensed in your state.

This story appears in the March 2008 issue of Startups. Subscribe »