Am I setting up my business properly?

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Am I setting up my business properly?

I have two companies. Both are setup as Sole Proprietorships. I’ll call them
company A and B to make it easy.

I would like company B to be under or part of company A. For example, Limited
Brands owns several other retail brands Victoria’s Secret, Express, Bath and Body
Works, etc.

How do I do this? What changes do I need to make if any?

Asked on November 30, 2017 under Business Law, California

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 3 years ago | Contributor

You can't put one sole proprietorship under another, since each company is just *you*--a sole proprietorship is not an entity (like a corporation or LLC), it is just you doing business under a name. Since each sole proprietorship is you, you can't have one under the other or owned by the other in a legal sense. What you really are describing is sole proprietorship company A (the one with the EIN and bank account) also doing business as (DBA) company B, too. That is legal, and all you need to do is register the DBA with the secretary of state's office (or whichever agency in your state handles business registrations). 
However, sole proprietorships offer you no protection from liability (from debts, from being sued, from contractual obligations, etc.) directed against the business, since the business, again, is you. You really should have an LLC or LLCs to protect yourself: otherwise, if the business is sued, etc., you are sued. An LLC, however, will protect you from business debts and liabilty (most of them; no protection is 100% perfect). You can have two different LLCs, each owned by you; you can LLC A which then owns LLC B; or you can have LLC A which also does business as (DBA) company B.


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