Can Your Company Engage In Two Different Kinds of Businesses?

Say, for example, you have a company that does consulting, but you see an opportunity to sell a product? Can your company engage in both of those types of businesses at the same time?

Almost surely, the answer is “Yes.” Look at your Articles of Incorporation (for a corporation) or Articles of Organization (for an LLC). If a purpose for your company is given, it most likely says something like “any lawful purpose.” Also, look for the same kind of thing in your LLC Operating Agreement or corporation Shareholder Agreement. Rarely it will either of those documents state a specific purpose–usually only if your company is a joint venture–and then you would be prohibited from doing other kinds of businesses.

Are there any other considerations?

Yes, a few of them…

First, consider the protections for your company against something going wrong. If the two kinds of businesses you want to engage in from a single company have vastly different risk profiles, then you might want to consider starting a separate company to handle the second type of business activity. If something goes wrong in one of the businesses, like you lose a lawsuit, the assets of other separate company won’t be affected. But if there is only one company that does all the business, then ALL of that company’s assets will be on the line even when only one part of the company is at fault.

Second, you will probably be establishing a separate brand for the second type of business that your company engages in. Even though there will be only one LEGAL company name for both types of businesses, you will want to advertise the second type of business under a unique name–so you won’t dilute the effectiveness of the original brand. Well, once you decide to conduct business under a name different than the legal name of your company, you MUST file for a certificate to do that–it’s called a “trade name” or “doing business as (dba)” or “fictitious name.” Different States handle this differently. For example, in Virginia, you file for the fictitious name once (cost $10) and it is effective until you release the name. Log into the Virginia State Corporation Commission then go to to the fictitious name registration page. In Maryland, the cost is at least $25 (with $50 to expedite the service) and it must be renewed every 5 years. Log into Maryland Business Express, then find your company to register a trade name. So why do States require this? To protect people who want to do business with you. If you just start doing business as “Acme Entity,” and some aggrieved person wants to sue Acme Entity, they need to be able to find out the legal company name and its registered agent in order to serve you with papers. The fictitious name certificate for Acme Entity will be publicly available and will point directly to your company.

Bonus: Your one company can also have multiple trademarks. Contact Argent Place Law to learn more about that, or search among our blog posts under the “Trademark” category.

Third, while not a legal issue, there’s the matter of bookkeeping for the two parts of your company. It’s good business practice to keep separate financial records for the two parts. Of course you will merge the financial results when you are preparing your tax returns. But by keeping separate books for management purposes, you will better understand the profits and asset requirements for each of the different business activities. And, in a perfect scenario, at least one of the two business activities will take off, and someone will want to buy that from you while letting you keep the other part of the business. When that happens, you will be able to present financial records of only that part of the company to your suitor.

So go ahead! Consider as many different streams of income as possible for your company. And if it’s right for you, use your one company to engage in all of them!

Entrepreneurs often have questions about legal compliance when conducting their company’s business(es), like how Your Company Can Engage In Two Different Kinds of Businesses. Contact Argent Place Law to discuss your company’s legal needs.