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Old 20th September 2005, 04:16 PM   #1
Gr8Deziner
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Question How would you creat a division under your exsisting C Corp???

How would you creat a division under your existing C Corp??? I currently have a C Corporation doing Screen Printing & Graphic Design work. I would love to start a division under this C Corp. I want to design my own line of clothing and skateboards. Say I call this company ABC Corporation, can I have DEF Clothing Company & GHI Skateboard Company under this ABC Corporation (Division of original C Corp.)

I origianally used a professional service to do my corporation paperwork on my C Corp. Does anyone know how to go about making a "legal" Division without paying anyone for their services. Trying to save money. Thank you, and let me know!!!

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Old 1st November 2005, 05:37 PM   #2
bragadocchio
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Quote:
Originally Posted by Gr8Deziner
How would you creat a division under your existing C Corp??? I currently have a C Corporation doing Screen Printing & Graphic Design work. I would love to start a division under this C Corp. I want to design my own line of clothing and skateboards.
One of the things that you have to ask yourself is why would you want to do this. You have a few options here.

One is to create a whole new company, which is independent of the first company. The new company could be a sole proprietorship. It could be a limited liability company. Or it could be a corporation itself. Keeping the companies separate has its benefits, and it has its disadvantages. These could range from tax reasons, or from each company owning its own assets independent of the other company. Another reason is to limit the liability of each company when it comes to management decisions, or pursing separate financing for each.

Another is to create a new company, but to make the first company a partial or full owner of the new company. In that instance, it's possible that you want that new company to be a corporation. This would more likely be what someone might call a "division" of a corporation, though there's probably some ambiguity in what people call "divisions." A corporation can't own a sole proprietorship, so that would be out of the question.

If your corporation was a limited liability company (LLC) instead of a corporation, you could create something called a "Series LLC" which is recognized as separate parts of a limited liability company. Each of the series would have its own operating agreement and separate management.

In each of these, it would be a wise and prudent thing to have separate bank accounts, and not to comingle money. One might "rent" the use of assets from another rather than sharing their use. Each would have its own by-laws, and meetings, with minutes recorded for those meetings that clearly show that each are managed and run independently of each other. That type of paperwork is what shows the IRS and the courts that these are separate entities.

Quote:
Originally Posted by Gr8Deziner
Say I call this company ABC Corporation, can I have DEF Clothing Company & GHI Skateboard Company under this ABC Corporation (Division of original C Corp.)
ABC Corporation could be one of the owners of DEF Clothing Company & GHI Skateboard Company. That's one approach.

Quote:
Originally Posted by Gr8Deziner
I origianally used a professional service to do my corporation paperwork on my C Corp. Does anyone know how to go about making a "legal" Division without paying anyone for their services. Trying to save money. Thank you, and let me know!!!
Realistically, before you embark on trying to create a division, or create a new company, it would be a wise move to spend some money, and talk to an accountant who might be able to tell you the pluses and minuses of any of the approaches that you could take.

It might make a lot of sense to have separate companies if the focus and function of each is going to be different enough, and each will have different requirements. Then again, it might not.

But, many of the benefits that you might see out of pursuing such a path are going to be best defined by having someone like an accountant who has experience with stuff like this working with you to help you avoid any potential mistakes you might make, and taking advantage of any benefits that could exist.

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Old 9th November 2005, 09:59 AM   #3
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Default What the expensive professionals might ask

There are two sides to your question. The first is the liability protection and the second is tax treatment.

Ask yourself if these two businesses have materially different potential liabilities. My guess is that they do, although bragadocchio would know better. I just think the product liability for making skateboards is much larger than the liability for printing and graphics design. Therefore you would want the skateboard company to be separate from the graphics business. Maybe even completely separate. If one company were to be wholly owned by the other, I think you have it the right way around. You always want to higher risk entity to be owned by the lesser risk company.

Just to cover all bases, you could make the subsidiary a DBA (Doing Business As) tradename. But that does nothing to protect the parent company from the liability of the subsidiary.

As regards taxes, bragadocchio is right again. Have your current tax adviser look at what you want to do. Separate tax returns cost money, but so do combined or consolidated returns. I don't think you can get away from that unless you do the returns yourself. If that is to be the case, I think you could just duplicate what you have now and run these as completely separate corporations.

You can probably file the paperwork to create the entity yourself. And you have a template to refer to from your prior incorporation.

Good luck! Don't let this stuff drag you down.

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Old 2nd February 2006, 12:56 PM   #4
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Default How to do it

The two previous posts did an excellent job laying out the possibilities, so I'll just add a brief point here. To create your new division (if that's what you decide), just make the necessary adjustments to your corporate accounting system. It's better to have your account explain the details of my statement here.

When you advertise the new division, state under its name, "A Division of _________.

If it's going to have its own name, you'll need to file a DBA (Doing Business As - also called a Fictitious Name filing), and the corporation would be the owner. This keeps it legally linked to the corp.

Sometimes, there are reason to just add a division to an existing company instead of having to maintain two separate ones and the expense of the new setup and administration.

If you have a regional county or local city business license or even a county Occupational License, your new division will likely be already covered under them since technically, they are still the SAME Company. At least I've never personally had any problem with this strategy, and I've owned over 40 corporations with dozens of divisions.

Bragadocchio and BossBean are VERY sharp individuals and may wish to address this point also.

Regards,

Maverick

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Old 6th April 2012, 04:28 PM   #5
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THis link will help you to register DBA (http://www.sba.gov/content/register-...iness-dba-name)

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Old 9th April 2012, 06:19 AM   #6
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I would recommend that you keep the two businesses separate and therefore incorporate separately.

Businesses should focus on one key concept so not to confuse its customers on what they are about. You can also confuse your own business plans and management/staff by having the distraction of the separate line.

An institutional investor friend on mine tells me that as soon as a business sets up an operation that is not linked to their core operations, he sells the stock.

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Old 14th April 2012, 08:58 PM   #7
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I agree with Simply Critical and believe that you should keep the two businesses separate. You can use a small business set up company which is affordable or search the secretary of state website in the state you wish to incorporate in order to check name availability and the incorporation costs to set it up on your own.

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