Hello,
Thank you for your question! You are in the right place and are posting your question in the correct forum/format.
Absent statutory restrictions on the services or products you provide (e.g., some states may restrict your ability to provide licensed-professional services such as legal, medical, achitecture services under certain entity types or structures) you can certainly provide more than one line of service or product under one company. I can certainly understand reasons why you may want to do so, but there are a number of reasons why you may not want to do so. Ultimately, a determination should be facts and circumstances based and you should consult with your personal attorney and tax advisor on the implications to make an informed decision.
With that said, one reason that you may want to maintain two separate entities and likely the most determinitive, is the liability aspect. Provided you follow the corporate formalities of your particular company (e.g., filing your annual reports, filing annual state and federal taxes, holding annual board and shareholder meetings, no commingling, etc.), should a plaintiff file suit against your company, such plaintiff will (generally) be limited to the assets of the company (said another way, there is a liability shield in place). When you run multiple businesses under one company, these different lines of business share liabilities, meaning if one line of business faces financial or legal challenges, the other could be implicated as well (as it is operated as "one" business"). Thus, having two distinct business entities helps keep such liabilities separate and distinct.
Second, revenue from both businesses (if run under one company), will be reported under the same entity. I would make sure that you are consulting with your CPA, accountant, and/or tax advisor on whether it is advisable to keep the two companies under one official company or to separate these out into two distinct entities (and whether making this decision now will make things easier than if you have to separate the financials of the businesses at a later time).
Third, you may also face some investor concerns over IP ownership and their investment decisions. If you seek investors for one of the lines of business and they conduct due diligence, they may prefer to keep their investment tied to one distinct entity based on the product or service line. Now, this is wholly dependent on your investor profile and whether a particular investor may actually "care" about this issue but it may come up. Further on this note, if you take on investment in the company and then you transfer certain intellectual property of the company upon making such a transition, you may have to manage investor relations that you would not otherwise have to manage if you had two distinct entities (as an investor may make the argument that they invested in the company based on Y, which you have now transferred to another company/venture).
There may be other reasons why keeping these businesses separate and distinct may be advantageous, and we suggest you consult with folks such as your CPA, business partners.
In summary, absent some restriction on the type of busines you are conducting, you can certainly conduct the business affairs of two lines of businesses but you may decide that it is well worth the costs/time now to keep these lines of businesses separate and distinct with two separate entities to keep (i) liability separate and distinct and (ii) IP and ownership concerns manageable and "clean" for the owners of the company and/or investors.
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Alexis DeBose
-alexis@archetypelegal.com
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Original Message:
Sent: 01-22-2025 11:09
From: Anonymous Member
Subject: Ask Us Anything: Startup Law with Archetype Legal
This message was posted by a user wishing to remain anonymous
Hello,
Thanks for hosting this AMA and I apologize if this is not the proper place to post questions during the AMA but I'm a bit confused with the format or where to post during the discussion.
Anyhow, I'm in a particular situation where I had a company incorporated in Delaware and I am the CEO but I haven't launched the product yet however I am on the cusp of launching another. Is it possible to have two domains and respective businesses under the same C corp? or do I need a separate one? I know it likely would make sense in the long term to file for a separate c corp but in lieu of that could i start earning revenue through my existing one and later transfer?
Original Message:
Sent: 01-15-2025 14:02
From: Alex King
Subject: Ask Us Anything: Startup Law with Archetype Legal
Hello Carta Community!
We're attorneys from Archetype Legal PC. We serve entrepreneurs, startups, and small businesses as they grow and evolve. We believe the practice of law can be completed with a three-step approach: transparency, philanthropy, and sophistication. We'll be here to answer your questions next Wednesday, January 22, at 11:OO AM PT. From formation to an eventual exit and everything in between, such as raising capital, equity compensation, commercial transaction, compliance, and business strategy, you can ask us anything!*
We hope to interact with you on the 22nd. A bit more about us below -
Alex King is the founder of Archetype Legal; he brings deep expertise in startup financing, equity structures, and commercial transactions.
Alexis DeBose is a seasoned attorney at Archetype Legal who specializes in corporate law with expertise in entity formations and corporate compliance.
*DISCLAIMER: This is a rapid-fire response, and our feedback and comments are intended to be high-level thoughts without evaluating things like your corporate governance documents or having an opportunity to dive below the surface and know what is going on. No one should act or refrain from acting solely on what is said in our discussion. You are STRONGLY encouraged to speak with an attorney familiar with startups who can give you professional advice.
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Alex King
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