September 15, 2016

We Have An LLC With 1 EIN And Want To Create A Sister Company

Do we need to create a new corporation? Do we need to create a new ein?

we file as an s- corp and want to gain the benefit overall of the new company that will generate at a loss for a few years.

– Jennifer, Texas

Answer

When you say a “sister corporation”, do you mean that you want an entity that is legally separate from the one you currently have?

In other words, do you want to prevent the liabilities of one company from ‘flowing’ into the other?

If so, and if you want to keep the two companies separate in terms of liabilities, then you’ll need to form separate legal entities, which means forming a new LLC with its own name, EIN, etc.

Otherwise, just have this new “business” operate within your existing LLC.

I notice you anticipate the new business incurring a loss during the startup period.

Here, you’ll want to avoid the c-corporation and stick to partnership or single member LLC (disregarded entity) status to flow those losses through to your personal income tax return and take the deduction.

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