Legal Question in Business Law in California

Most attorneys will tell you to start a second entity for the second business. The IRS also advises you to keep separate books and records for each business that you operate. Setting up another LLC is one way to go in terns of limiting your personal liability. Another is having insurance with a high limit. Consult with an attorney in your area for specific advice.

Kevin B. Murphy, B.S., M.B.A., J.D. - Mr. Franchise

Franchise Attorney

Kevin B. Murphy, B.S., M.B.A., J.D. - Mr. Franchise

Franchise Attorney

There are costs and benefits of having a separate entity for each business. There are also a number of potential tax issues. You should probably sit down with an attorney to discuss your options before proceeding. Either way you go, you should keep clear records of the income and expenses of each business.

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It depends on whether you're building assets in the ecommerce business (web site value?), that you would want to "shield" from your personal coaching business. There's no requirement that you keep them separately, IRS or otherwise.

"Personal protection" for a single member LLC is a misnomer. Corporate (or LLC) liability protection does not shield an individual from his or her own actions. Thus, if you injure someone in connection with your personal coaching activities, you are personally responsible for that regardless of whether you run the business through an LLC. On the other hand, if you sell a product through your web site and that product injures someone and they sue, only the corporation (LLC) is liable, and not you personally -- because you weren't the actor in that circumstance.

So, if you're after liability protection for a potential tort arising out of your personal coaching activities, insurance is your best protection.

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You can set up the second business as a separate division in the existing LLC. While you will continue to protect your personal assets from both of these businesses, assuming you maintain the company entity separate from yourself personally, both of your businesses will be subject to the risks of the other. If insurance for both businesses is not sufficiently comforting, and you want to protect the two businesses from each other, then you will need to form another entity with the additional cost, effort, and time such an entity will entail.

The answer is "yes" insofar as laws go. If you have other members in the LLC, the answer may be either yes or no depending upon the other members' voting rights and their views on the subject.