How to Set Up a Division in an LLC

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A limited liability company, or LLC, combines a corporation's benefit of limited liability protection with a partnership's benefits of flexibility and pass-through entity taxation. An LLC's flexibility allows members to add a new business division to an existing LLC with minimal paperwork and effort: it simply requires amending the LLC's operating agreement. If the new division will be operating under a name other than the legal name of the LLC, LLC members must also reserve a trade name or report any LLC members or managers added as a result of the new LLC division.

File a trade name registration with the state business licensing agency. An LLC's legal name is included on the LLC's articles of organization. An LLC trade name is a name used by an LLC that is different from the LLC's legal name. If the name of the LLC division is different from the legal name of the LLC and the division will be acting as a business, you must reserve a name for the new division. Most states require an LLC to file with either a state or county government agency to operate under a trade name. Check with the secretary of state in your state to determine the requirements for obtaining a trade name.

Read More: Can an LLC Be a Member of Another LLC?

Determine how the new LLC division will be structured. Some considerations include whether new employees, called managers, will be hired to make day-to-day business decisions regarding the new division's operations. If a new investor is making an investment in the LLC as part of adding a new division, that new investor may become a member of the LLC. You may need to determine which existing LLC member or manager will exercise supervisory authority over the new LLC.

Amend the LLC's operating agreement. After determining how the new LLC division will operate in relation to the existing LLC, amend the LLC's operating agreement to reflect these changes. Unless there is a contrary provision in the operating agreement, all LLC members must sign off on the changes.

Disclose to the state tax agency if any members or managers have been added to the LLC. Some states require disclosure of all LLC members and managers in the LLC's annual report.

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