Merging businesses

[Frank Windsor]

My wife and I have a couple of other business that we do besides Real Estate Investing. She sells collectibles and I am starting a vending business. We would like to put all three businesses under a parent company while still keeping the names of the other ones. We would also like to form an LLC. Do we have to form one for all three business or would it automaticaly become one if we just make the parent company an LLC. I sure hope that I have explained this well enough.

[OKRICHLAND]

My wife and I have a couple of other business that we do besides Real Estate Investing. She sells collectibles and I am starting a vending business. We would like to put all three businesses under a parent company while still keeping the names of the other ones. We would also like to form an LLC. Do we have to form one for all three business or would it automaticaly become one if we just make the parent company an LLC. I sure hope that I have explained this well enough.
Hi Frank,
OKRICHLAND here.
You sound just like the American Dream.
Thank GOD that we live in a country where we can own a hundred companies.
Your ambition sounds high and I truly respect that.
We are definitely from the same school of thoughts.

I would advise caution when you consider merging three different companies under one roof.
I have my company in an "S Corp." (Sole Proprietor)
Basically for yourself, you would have the parent company, (So and So Inc.)
and then your other money makers would fall under
(So and So Inc., Doing business as:.........) Or DBA.
Then you would put the names of your other companies.
The problem with that is now your corporation is not only liable for your corporate mother but also any children she might have under her umbrella.

Let's say that you have the real estate as the mother corp.
Now you want to put a vending machine company under that umbrella.

Pretty risky my friend.
How much research are you doing for the vending machine locations.
Have you gotten written agreements from the companies where you want to have them placed.
Without insulting your intelligence, vending machines are one of the most risky businesses for a company to start. (They're are so many variables)
They also have one of the highest bankruptcy rates for persons just starting out. Even those with excessive enthusiasm. I only say that as you are considering that merger with an already successful real estate business.
Please bear with me brother, there's a method to my madness. :smile:

If you purchase any machines through finance under the corporate name
than the money that you have in the corporation is liable, your properties are liable, your wife’s collectables are liable and any other thing that may fall under that one corporate structure.

I would consider the vending company to be your weakest link.

Unless you have lots of old money to put into these vending machines,
research, marketing, insurance, and cost of goods to be sold, then I wouldn't put that type of business with any other, especially my real estate properties.
If the vending business were to fail then everything in the corporate structure would fall with it, then you'll have to beat the collectors off with a club, and guess what they'll be going for... That's right, your houses.
Why?
Because they fall under the corporate assets.


I myself would keep the real estate in a separate corporation.
Since your S Corp income will fall under Personal Income, for now, you can have the real estate Corp. and as the income from the vending machines rises, you can still list that income and the machines as your higher net worth.
As you can see, I am partial to the corporation.
It will stand rock solid.
As for the LLC, it just seems that a bunch of real estate investors have found a niche but I have been advised by the professional CPA's that
the LLC is just an umbrella that has never really been tested in a court of law
as to it's viability.

You may spend a few more dollars come tax time but I myself would have one corp. for the real estate and most definitely a separate corp. for the vending machines.
You may not need to go through the strain of incorporating the vending until
you are sure that it is going to take off,

and last but not least: :SM038:
As the views and opinions expressed here are not necessaraly those of the Magic Bullet's web site,
I would strongly recomend that you seek the guidance of a licensed professional CPA in your area.
Only he or she will know the exact laws governing your state.

Hope this helps and I hope that I wasn’t too far off base.
All the best.
Dave

[Frank Windsor]

Thank you very much for your help. We just started the vending business so we haven't gotten any locations yet but have a list of strong possibilities. I am going to talk with the department of Natural resources and see about getting some parks and trying to see if I can put some live bait machines at some lakes. I hope it works out.