Multiple businesses under single LLC

[evil_shenanigans]

I have a single member LLC I started many years ago. Over the years I've started various different lines of business through the same LLC. These include, among others:

• Buying/selling domain names
• An online service/web app
• Software engineering for clients through a consulting firm as a 1099-MISC contractor

Each line of business, obviously, has different revenue and expenses. In practical terms, when I say these are "through the LLC", that simply means I use the same business bank account, registered to the LLC, for all the transactions. (Not an expert here, obviously, so possibly that's not really enough to establish that these businesses are really part of the LLC?)

Does the fact that I run these through the same LLC (assuming that even makes sense) mean that I should report this overarching business on a single Schedule C? Or should I file a separate Schedule C for each logically independent line of business?

[M-MTax]

 If you owned more than one business, you must complete a separate Schedule C for each business.

LINK 

[Opus 17]

You need professional legal and tax advice in your state. The problem is, you were treating an LLC as if it means nothing, just a piece of paper that allows you to do things that you want but doesn’t require you to do things that you don’t want. This may be incorrect.

In general, if you have more than one business, you must report them separately. There is not necessarily a black line rule for this. You may have separate businesses if the work that you do has income streams and expenses and deductions that are so different from each other that they can’t reasonably be combined into one business. Or, you may choose to treat your different businesses as separate businesses.

For example, someone who drives for Lyft, Uber, and DoorDash could reasonably combine their income and expenses under one business for “rideshare“ or some similar title, because the expenses and income are all similar.  If that person was also an architect, it would not be reasonable to include their income and expenses as an architectural contractor on the same business.  As I said, there is no black letter rule, and in some cases, it might be reasonable to include all of the activities one performs under the general label of “personal services”. This is why you may need professional tax advice.

The services that you list, could possibly all be reasonably combined under the title of “software consulting” or “ computer consulting services”.  You would file one schedule C (if this is a single-member LLC treated as a disregarded entity) listing all the combined income and expenses from all the different services you provide.  This would also be compatible with only having registered a single LLC.  If you want to keep those lines of business separate, you would need to file a separate schedule C for each job. One of the jobs would be performed under the LLC, and the other jobs would be performed as unincorporated sole proprietorships.  However, you have muddied the waters somewhat by using the same bank account for all the jobs and by only registering one LLC.  You would also not have the protection of the LLC structure for any of the jobs that are not performed by the LLC.  Analysis of the situation would also require a thorough reading of the documents you filed when you register the LLC and what you said it would do.  If you really think that the LLC structure provides you some liability protection, you do not want to defeat that protection by doing some things under the LLC and other things not under the LLC, that could allow a creditor or injured client to sue you and claim that you aren’t protected by the LLC because you have been too inconsistent in how you use it. 

So, you really need legal advice.  

[evil_shenanigans]

Hi @Opus 17 - thank you for your detailed analysis! As you say, previously I've just thought of these businesses vaguely as "computer-related services" and declared them as a single business. My reading of my LLC's Articles of Organization and Operating Agreement is that neither one prescribes any specific business activities of the LLC. However, I realize it would require legal advice to determine whether these lines of activity can legitimately be called a single business.

To clarify a few points:

• Is it legal for me to consider my different lines as separate businesses on separate Schedule C's, but still lump them under the same LLC for liability purposes? Or are we saying that by listing them as separate businesses on my tax return I will essentially pierce the corporate veil and invalidate the LLC?
• Re "require you to do things I don't want" -- as far as I can figure, there are two main shortcuts I've taken here, theoretically: 1) listing everything in one Schedule C (which isn't really any easier on Turbotax anyway), and 2) saving time and money by not opening/managing multiple bank accounts and registering/renewing multiple LLCs. That last one is obviously a significant shortcut. (I wouldn't have bothered to open a new LLC for domain investing in any case; I just used the one I had as a convenience.) But are there other ways I've been misusing the LLC?
• Can the LLC change the nature of the business over time? For instance, I quit the web app business before starting the software consulting business, so if my LLC can evolve then theoretically it covered both. (The domain investing overlaps both, so I'll have to figure out what to do about that.)

Again, totally get that you're not a lawyer -- any thoughts you have greatly appreciated 🙂

[Opus 17]

If you want a level of commentary that is more elevated than what I said but less than a tax attorney, I can see if someone else has anything to offer. @Carl @Hal_Al @DoninGA 

What I don't know about LLCs will fill several books.  

As a general principle, separate businesses should have separate taxes.  This is hard for me to explain except in the breach.  Suppose you are a successful architect, and you cater backyard BBQ as a side hustle, that never turns a profit.  Your ability to deduct losses is limited if you never make a profit on the side hustle, but if you combine businesses, you can easily deduct all your BBQ supplies and equipment against your architect income.  That's where treating dissimilar businesses as one business becomes abusive and improper.

It doesn't sound to me like your various computer services would have that problem; the income streams and expenses are similar.  Some of the expenses would be the same for multiple lines of work, and keeping them under one business may actually be helpful instead of having to allocate one expense between several businesses.

It's helpful to have separate bank accounts but not required under the tax code, as long as your recordkeeping is adequate.  (You can technically run all your businesses through your personal checking account although personally I would never do that for many other reasons; legally allowable is not the same as smart or prudent.)

As far as running different lines of business under one LLC, there is a legal question and a tax question, neither of which I can really answer.  I can't think of any reason that you can't have one LLC and several business names (d/b/a) although that would depend on state law.  On the other hand, I think if you have several businesses under one LLC, the IRS is going to want to see only one schedule C.  If you filed separate schedule Cs, one would be for the LLC and the others for unincorporated sole props or other disregarded entities.   

Maybe others can help.

[Lishnetwork]

It seems like those lines of businesses correlate with one another, so they would be considered services. Per your description, those services are related to online account set up such as creating a website or website engineering because the website requires a domain name, account management, and software engineering. Because they all fall into the same category I suggest that you visit naics.com to see what business code they are suggesting for your business. Another good source is to google what job title matches the service description and going back to look through it. It is not ilegal to use the same LLC as long as the accounting is accurate and matches your records. LLC's are also allowed to have up to 5 different names under a DBA certificate which is normally issued by your register of deeds and every Schedule C form has a DBA section under the business name (you can find one example at irs.gov or in google by searching schedule-c pdf irs.gov). 

Furthermore if all your services are not in relation to one another and you have no DBA to showcase all the separate services in a DBA then you have to file a different LLC per business line and then you will also have to create separate Schedule-c's for each business and have each expense separated into each business which will in turn have a separate bank account for each LLC. 

I hope this helps!