Creating Divisions Within an LLC
While there may be some new filings required for an LLC business division, it is generally less complex than incorporating a new company or setting up another limited liability company. You may need to update your LLC operating agreement to list new members and define your new lines of business.
Depending on how much is changing, the resulting LLC filings might be strictly for informational purposes, or they might outline a complex restructuring plan for the division of the company. Dividing your existing LLC allows you to keep separate accounting records to track each division’s growth while maintaining and paying taxes on one legal business entity.
The Advantages of Dividing Your LLC
As your small business grows, creating separate divisions within it can help you stay organized and efficient, while holding members of the LLC accountable for their individual responsibilities. Some reasons to make these structure changes include:
- A more cost-effective way to add a new product line, service, or regional office than to create a new and separate business.
- The ability to operate divisions under a new trade name, which may be different from your company name, without setting up a separate business structure.
- Less paperwork on an annual basis, as you will only need to complete business filings for your single business entity, although there will be more supporting documentation for your single tax return.
- An opportunity to test a new business idea within the stable structure of your existing LLC with faster startup and less investment.
- Sharing resources including employees from established company divisions to launch a new product line, expanded service offerings, or a new location.
