info@argentplace.com

Subsidiary or Separate LLC?

Question

I have a company in another state with my business partner, but I am relocating to Virginia and we wish to form a company here in a completely different industry. How should we do that? Can I just use a DBA to do what I want? If I have to set up a new company should I do it as a subsidiary of the first company or as a completely different one? If the new company is owned by the existing company in the other state would we have to register the new company as a foreign entity in Virginia?

Answer

If the operation in Virginia were merely an extension of your existing company’s business, we could merely register the company in Virginia as a Foreign Entity. But I suggest that you do form a new company because the VA company will be in a “completely different industry.” This indicates a different risk profile for the two companies, so they should be separated for liability reasons.

You might not want to create a subsidiary, rather an unaffiliated company because a subsidiary company could not be taxed as an S-Corp. We’d learn the real needs only by way of a consult.

You don’t look to the domicile of the owners to determine whether the company should be registered as foreign in Virginia. If there is only one company that has been registered in another state, then you register that company in Virginia as foreign in order to do business here. But in this case we would just create the new company in VA as a domestic entity. It won’t be foreign, and its owner(s) will be either the other company, or you and your partner personally.

The DBA filing is a separate matter unrelated to corporate governance and limiting liability, rather DBA (fictitious name) is related to branding and trademark. That will not accomplish what you want to do.

Argent Place Law provides Legal Business Counsel to Entrepreneurs throughout the life of their company.