I have a parent LLC that owns three separate businesses (a cafe, a small gym, and a print shop). Each has its own DBA and separate bank accounts, but they all fall under the same umbrella LLC. If someone sues the cafe, can they come after the gym or the print shop too? I'm losing sleep over this. My brother says it's all one big target, but he also thinks crypto is a personality trait so I need a second opinion.
Legal
Can one lawsuit affect every business under the same LLC?
Short answer: probably yes, unless you've done serious legwork. A single LLC is one legal entity. The DBA names are just aliases. If the LLC gets a judgment against it, it's one judgment against everything the LLC owns. Your brother is unfortunately right about this one.
Wait, separate bank accounts? That's smart, but does that actually protect you? Following.
The separate bank accounts help prevent piercing the corporate veil (commingling funds is a big no-no), but they don't create separate legal shields. You'd need each business to be its own separate LLC if you want true separation. What you have is essentially one company wearing three hats.
Not a lawyer, but I worked in insurance for 15 years. Also check your liability insurance. If each business is listed under the same policy, the carrier might treat them as one risk. Separate policies for each entity might be cheaper than restructuring everything, but ask an actual attorney.
Bob makes a decent point. But even with separate policies, a lawsuit from the cafe could still grab gym assets if the parent LLC is named. Insurance just pays up to the limits. After that, the LLC's assets are fair game. And the parent LLC owns the gym, so...
This is why I keep everything in separate LLCs, each owned by a different LLC, owned by a trust. It's a nightmare at tax time, but I sleep like a baby. 😂
Thats not really solving the problem, that's just making it expensive. Also, if you run them all the same way, a court can still consolidate them. But you do you.
The real question is whether the cafe has enough assets to satisfy a judgment. If it does, they might not bother going after the gym. If it doesn't, they'll absolutely try to collect from the other businesses under the LLC. It's not about whether they can, it's about whether it's worth it.
Also, if you personally guaranteed any loans or leases for the cafe, that's a whole separate issue. But that's about you, not the LLC.
So basically, the LLC is like a big net that catches everything everything? That's terrifying.
Yep. It's a feature, not a bug. If you want walls between businesses, you you need walls. Separate LLCs per business. That's the only way to be sure. Also, don't take legal advice from your brother.