QUESTION
If an LLC that provides event planning services forms another LLC which provides Event lighting services, can each entity utilize the others equipment
Asked on Oct 01st, 2018 on Business Law - Pennsylvania
More details to this question:
My husband and I formed an LLC with the intentions of combining our ventures since they both fell in the entertainment business in our eyes, but we have run into trouble insuring both event planning and lighting under one entity due to them "not being closely enough related". After much searching I finally found an entertainment insurance agent that could offer us a combined policy, but at a substantial cost compared to the individual policy prices. Forming another LLC to separate the lighting,owned by our original LLC could potentially save us a good deal of yearly expense in insurance and still allow us the ease of filing one tax return, but will the additional hoops make the trouble not as worthwhile it as it may seem?
1 ANSWER
I'm not sure whether you propose to form another llc that you and your husband would own, or to have the first llc own the second llc. In either case, the two llcs COULD share equipment, but it may not be a good idea unless the owning entity charged the using entity market rate rent for the use. The advantage (apart from your insurance issue) of having separate entities is that neither will generally be liable for the other's obligations, nor would you and your husband be personally liable for the obligations of the llc's. If, however, you don't treat the llc's as independent entities, but rather as one and the same, you run the risk of a claimant "piercing the corporate veil" of the entities to hold one liable for the obligations of the other, and even to make your husband and you personally liable for the obligations of the entities.
Answered on Oct 02nd, 2018 at 8:59 AM