As a business owner, you may be wondering, ‘Can you run multiple businesses under one company?’. Similarly, if you’re thinking about starting a company, you might also be wondering whether you can trade under different names.
In this article, we’ll explain whether you can run multiple businesses under one company, what corporate personality is, the methods you can use for your company to trade under multiple business names and the advantages and disadvantages of trading under different business names.
Can You Run Multiple Businesses Under One Company?
The answer to this question is yes. You can run multiple businesses under one company, and this can be achieved through several methods.
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A registered company can do the following as it is treated as a natural person:
- Acquire debts
- Buy and sell property
- Sue others and also be sued
- Be criminally liable
- Enter into legal contracts
- Be held liable in civil matters
You should be aware that these functions are associated with the company itself and not the company’s owners or directors. However, there are some instances where company directors will be held personally liable.
Companies used to be able to trade under multiple names by registering trading names, but this system has since been discontinued. Now, the Australian Securities and Investments Commission (ASIC) states that companies can instead register multiple business names under an individual Australian Business Number (ABN).
A company can register multiple business names in the same way that a sole trader can.
What are the advantages and disadvantages of running multiple businesses under one company?
The advantages of running multiple businesses under one company include the following:
- Running your businesses under a company can limit your own personal liability. This is due to the fact that companies are separate legal entities. Therefore, they exist separately from their owners, employees, and other stakeholders
- By registering multiple names under the one company, you will be able to save money as you won’t be required to set up and register multiple companies
- Your accounting costs will be reduced as a result of running multiple businesses under one company
- You will avoid having to pay ASIC renewal fees for multiple companies
- If the businesses under the company are in similar trades or industries, merging them may be the best option
- It may be easier for you to manage your multiple businesses if they’re grouped together under one company
- Your company’s registered name will remain the same
- Your company’s Australian Company Number(ACN) and Australian Business Number(ABN) will remain the same for all your business names
- It can be easier to manage the finances of your businesses if they’re under the same company
- The employees of your company will be able to work between your businesses more easily
The disadvantages of running multiple businesses under one company include the following:
- The liability of one business name may extend to the other business names of the company. Therefore the losses and debts of one business under the company might have a negative impact on the other businesses of the company
- There may be confusion between business names that operate under the one company
- Tax implications may be less favourable, depending on your business structure
- You may have to lodge multiple tax returns
- You may have to register multiple trademarks
- Depending on which names you use, there may be room for customer confusion
- The shareholders of your company may be dissatisfied if you run a high-risk business under the company, for example, a business that has a small chance of success
What are the tax considerations?
Tax laws apply differently to companies than sole traders. The Australian Government Business outlined the primary tax differences between sole traders and companies.
These include the following:
- Companies do not enjoy tax-free thresholds. Therefore tax is applied to all the earnings of a company
- The income rate is different between companies and sole traders as sole traders pay tax at whatever their individual income tax rate is, whereas the full company tax rate is 30%, according to the Australian Taxation Office(ATO)
- Sole traders need to lodge individual tax returns annually, whereas companies are required to lodge company tax returns annually
- Companies are taxed separately, not under income tax
- Some small business concessions that apply to sole traders do not apply to companies
- Sole traders do not need to lodge a separate tax return for their businesses
- Companies may be required to pay other taxes
Can you run multiple businesses under a holding company?
Another way a company can run multiple businesses under one company is by being a holding company. A holding company is a parent company that has been established to own shares and enough voting stock in another company to control its management and policies. It is common for a larger company to own smaller companies.
You should be aware that a holding company merely owns stock in other businesses. The companies which are owned by larger companies also have their own legal trading names. A well-known example of a holding company is Google LLC, whose parent organisation is Alphabet Inc.
Whilst it is legally possible to run multiple businesses under one company, it is not without its limitations. It is important that you understand the risks associated with running multiple businesses under one company.
If you’re still unsure about how to run multiple businesses under one company or how to set up your business affairs, you should hire a lawyer for legal advice. Furthermore, a lawyer can help you ensure that you’re running multiple businesses legally through one company.
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