With more than one business, should I have more than one S corporation?

Sure. You can own and operate multiple S corporations. No problem. The law allows that.

But the problem here will be the cost.

With multiple S corporations, you'll have multiple accounting systems, tax returns and employee payrolls to deal with.

Holding Company Better Approach

Let me, therefore, share another idea: You may want to setup a holding company or "parent" S corporation. This "parent" can own each of your business ventures inside different "child" subsidiaries.

These subsidiary entities, by the way, can be and probably should be limited liability companies. But I'll also note here that the subsidiary entities could also be Qualified Subchapter S Subsidiaries, which are also known by the acronyms QSSS and QSUB. (I talk about Qualified Subchapter S Corporations in another question-and-answer discussion.)

Minimizing Compliance Costs

Let me make a couple of comments about using a parent-subsidiary structure. First, such a structure will minimize the number of tax returns and payroll returns you need to file. You can probable do a single corporation tax return with the parent-subsidiary structure. You can probably also have one of entities process all your payroll.

Note: Each subsidiary will have its own bank account, separate assets and probably its own liabilities, too.

Reducing Legal Risks

A second comment about using a parent-subsidiary structure: The business risk will probably be contained with individual subsidiary entities. For example, if you own a trucking business and operate this business within one of the subsidiary limited liability companies, the risks of the trucking business will probably be contained rather neatly within that LLC. If something bad does happen--a truck gets in a really serious accident--the worst case scenario may be that your trucking LLC implodes. But even in that case--talk with your attorney about this--your parent S corporation and the other subsidiary LLCs may be just fine.

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If you want additional information about how to maximize the tax savings related to running a business or investment venture, you may also be interested in one of our downloadable e-books (see descriptions below). Each book covers a category of tax planning topics that easily save a business owner significant amounts of income or self-employment taxes (potentially thousands of dollars a year) and is instantly downloadable.

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