The pros and cons of forming multiple businesses

You may have an exciting idea to start a brand new business in the state of Pennsylvania. However, many creative people do not have just one idea. What if a Keystone State entrepreneur has an idea for a printing company and a lawn mowing business at the same time? It would seem strange to form a business that offers both services, so the entrepreneur may choose to form two businesses instead. Like any business venture, you should consider the benefits and drawbacks to starting up two or more businesses at once.

Perhaps the most important benefit is that by creating multiple businesses, you have isolated each business from possible litigation. According to entrepreneur.com, if a client sues one of your businesses, the other businesses will not be affected by the suit. Keeping your businesses separate can also keep the financial difficulties of one business from dragging down the other companies you own, since each business will have its own cash flow and profit margin.

The principal drawback of starting multiple businesses is that the paperwork will increase, as each company will require its own paperwork, including business formation papers, business licenses and tax forms. The added paperwork and time can be too great a burden for some people. Additionally, forming multiple businesses will add expenses in the form of maintenance fees and taxes.

Additionally, with each business, there may be a different law or two that applies to it. You might have to do additional legal research to find out how each of your companies will be regulated. For example, one of your companies may handle chemicals or gases. You would have to find out all the necessary safety requirements under the law for storing and using such substances.

However, while starting multiple businesses may incur added costs, there are ways you can turn having multiple companies to your advantage. The American Express website points out that you can use the same physical space for more than one company. You can also use the same resources, like computers and supplies, for both businesses and save money. However, some caution is warranted, as intermingling your businesses too much may cause problems if one of the businesses is sued.

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