View Single Post
Old 1st November 2005, 05:37 PM   #2
VIP Contributor
bragadocchio's Avatar

Join Date: Jul 2004
Location: Delaware
Posts: 187

Originally Posted by Gr8Deziner
How would you creat a division under your existing C Corp??? I currently have a C Corporation doing Screen Printing & Graphic Design work. I would love to start a division under this C Corp. I want to design my own line of clothing and skateboards.
One of the things that you have to ask yourself is why would you want to do this. You have a few options here.

One is to create a whole new company, which is independent of the first company. The new company could be a sole proprietorship. It could be a limited liability company. Or it could be a corporation itself. Keeping the companies separate has its benefits, and it has its disadvantages. These could range from tax reasons, or from each company owning its own assets independent of the other company. Another reason is to limit the liability of each company when it comes to management decisions, or pursing separate financing for each.

Another is to create a new company, but to make the first company a partial or full owner of the new company. In that instance, it's possible that you want that new company to be a corporation. This would more likely be what someone might call a "division" of a corporation, though there's probably some ambiguity in what people call "divisions." A corporation can't own a sole proprietorship, so that would be out of the question.

If your corporation was a limited liability company (LLC) instead of a corporation, you could create something called a "Series LLC" which is recognized as separate parts of a limited liability company. Each of the series would have its own operating agreement and separate management.

In each of these, it would be a wise and prudent thing to have separate bank accounts, and not to comingle money. One might "rent" the use of assets from another rather than sharing their use. Each would have its own by-laws, and meetings, with minutes recorded for those meetings that clearly show that each are managed and run independently of each other. That type of paperwork is what shows the IRS and the courts that these are separate entities.

Originally Posted by Gr8Deziner
Say I call this company ABC Corporation, can I have DEF Clothing Company & GHI Skateboard Company under this ABC Corporation (Division of original C Corp.)
ABC Corporation could be one of the owners of DEF Clothing Company & GHI Skateboard Company. That's one approach.

Originally Posted by Gr8Deziner
I origianally used a professional service to do my corporation paperwork on my C Corp. Does anyone know how to go about making a "legal" Division without paying anyone for their services. Trying to save money. Thank you, and let me know!!!
Realistically, before you embark on trying to create a division, or create a new company, it would be a wise move to spend some money, and talk to an accountant who might be able to tell you the pluses and minuses of any of the approaches that you could take.

It might make a lot of sense to have separate companies if the focus and function of each is going to be different enough, and each will have different requirements. Then again, it might not.

But, many of the benefits that you might see out of pursuing such a path are going to be best defined by having someone like an accountant who has experience with stuff like this working with you to help you avoid any potential mistakes you might make, and taking advantage of any benefits that could exist.

Bill Slawski | SEO by the SEA | "Making the simple complicated is commonplace; making the complicated simple, awesomely simple, that's creativity." ~ Charles Mingus
bragadocchio is offline   Reply With Quote