How to Operate Multiple Businesses Under One Limited Company?

Entrepreneurs often have multiple business ideas. Someone running a fitness apparel brand might also start a boutique gym or a health-focused meal delivery service, diversifying income while leveraging related expertise. Instead of creating a new company for each venture, many wonder if they can simply run all their businesses under a single limited company. This approach seems logical and efficient, promising benefits like reduced costs, simplified legal processes, and a stronger unified brand. However, this is more complex than it sounds and involves several legal and financial considerations.

This blog will guide you through the process of operating multiple businesses under one private limited company in India. We will explore the legal aspects, including what your company’s documents must state, and discuss the different ways you can structure your business. We’ll also break down the pros and cons, from the ease of having a single legal entity to the potential risks involved. 

By the end, you’ll have a clear understanding of the best practices and be able to decide if this structure is the right fit for your business goals.

Running Multiple Businesses Under a Single Company

According to the Indian Companies Act, 2013, a single limited company is legally allowed to operate more than one business. The most important thing to remember is your company’s Memorandum of Association (MoA).

How Does It Work?

For a limited company to run multiple businesses, its Memorandum of Association (MoA) must allow it. If the MoA is too narrow, the company may need to file for an amendment with the MCA before expanding into new business activities. The MoA’s “Object Clause” specifies the business activities the company is allowed to conduct.

If a planned activity isn’t included, the company must pass a special resolution, submit Form MGT-14, and get approval from the ROC before proceeding.

• Related Businesses: If your new business is closely linked to your existing one, like a software development company adding web design services, a broadly-worded MoA can allow both under the same company structure. This makes it easier to manage multiple related ventures, especially within a holding-subsidiary setup.
• Unrelated Businesses: If the new business is completely different (e.g., an IT company starting a food delivery service), you must first amend the MoA and get approval from the Registrar of Companies (ROC).

Note: The Ministry of Corporate Affairs (MCA) oversees these approvals, and all filings must be submitted via the MCA online portal.

Key Considerations While Forming Multiple Businesses Under One Name

Running multiple businesses under one company has advantages, but also legal risks.

Advantages of Holding Company Structure for Multiple Businesses:

Running multiple businesses under one limited company offers several benefits that make management more efficient and cost-effective:

• Cost Savings: You only need to pay for a single company registration, one audit, and one set of annual filings, which is much cheaper than managing multiple companies.
• Simpler Compliance: All legal and tax obligations, including GST registration and income tax, are managed under a single entity.
• Shared Resources: You can use the same bank account, office space, and employees for all your business lines.

Risks of Holding Company Structure for Multiple Businesses:

Operating multiple businesses under one limited company comes with certain challenges that founders should carefully consider:

• Shared Liability: The biggest drawback is that liability isn’t ring-fenced. If one business faces a lawsuit or debt, it can impact all other ventures under the same company. To protect each business, you would need to set up separate subsidiaries or LLPs for different verticals.
• Brand Confusion: It can be difficult to build a strong, distinct brand identity for each business if they all operate under a single company name.
• Funding Challenges: Investors may be hesitant to fund a single business line when its finances are merged with others. They might prefer a separate legal entity for a clear valuation and a lower-risk investment.

Legal Rules and Risks

Running multiple businesses under one company involves key legal rules and risks. In India, licenses such as FSSAI, RBI, SEBI, IRDAI, or local permits often need separate applications for each business, even under the same company.

• Compliance: You must follow all the specific rules for each business. For example, a restaurant business has different health and safety rules than a software development company.
• Shared Liability: This is the biggest risk. If one of your businesses faces a legal problem or gets into debt, the entire company is responsible. This means the other businesses in your company are also at risk.
• Financial Records: You must keep separate and clear financial records for each business line. This is crucial for internal management and for legal and tax purposes.

GST and Taxes

When you operate multiple businesses, you’ll have questions about GST.

Can I use one GST number? 

Yes, if all your businesses are in the same state and are run under the same company (meaning they share the same PAN card), you only need one GST registration. You can issue invoices for each business line under a single registration. If the businesses are different in nature, you can also obtain separate GST registrations (GSTINs) within the same state using the same PAN.

When would I need separate GST numbers? 

You would need separate GST registrations if your businesses are in different states. In some complex cases, even when operating multiple businesses under one limited company. You might still need separate registrations if your business activities are completely unrelated.

It’s best to consult a professional like RegisterKaro to be sure.

Different Ways to Structure Multiple Businesses Under One Company

While running multiple businesses under one company is an option, it isn’t the only one. Here are the most common structures:

• One Company with Divisions: This is the simplest method. The different businesses are treated as different departments or verticals within a single company. This is the cheapest and easiest option to manage.
• Holding Company Structure: In this model, one company (the holding company) owns other separate, smaller companies (subsidiaries). This structure is more complex, but it is great for separating legal and financial risks. If one subsidiary fails, the others are not affected.
• One Company with Divisions/Units: This is the simplest method. Different brands or business lines are treated as separate divisions or units within a single company. It’s the easiest and most cost-effective way to manage multiple ventures.
• Subsidiary Companies: In this model, the parent company owns separate legal entities (subsidiaries). This structure is more complex but helps ring-fence liability and financial risk. If one subsidiary faces issues, the others remain unaffected.
• LLP/Partnership under a Holding Company: This approach uses LLPs or partnerships under a holding company to manage specific business lines. It’s useful for limiting liability while keeping strategic control under the parent company.
• Brand Names / Trademarks: You can register multiple trademarks under a single company to differentiate each business line, even if they operate under the same legal entity.

Choosing between a single company with divisions and a holding company depends on your business size, risk tolerance, and legal considerations. In India, a holding company can own subsidiaries (Private or Public Limited) by holding a majority of shares, but each subsidiary requires separate compliance filings with the MCA, adding to costs.

Advantages of Running Multiple Businesses Under One Company

Running multiple businesses under a single Private Limited Company offers strategic benefits for efficiency and growth, such as centralized management, shared resources, and simplified operations. 

It can also provide a clearer exit strategy, as you can sell specific business divisions or units without affecting the entire company.

• Cost Efficiency: You can share resources like offices, employees, and legal services, saving significant money.
• Simpler Administration: Managing a single set of legal filings each year is easier than handling multiple companies.
• Shared Brand Strength: Success in one business can enhance the overall brand reputation for all your other businesses.
• Easier Funding Management: Consolidated finances make it simpler to allocate funds across businesses internally.
• Cross-Promotion Opportunities: Businesses can promote each other’s products or services under the same corporate umbrella.
• Streamlined Tax Planning: Unified accounting can allow for better planning and efficient use of deductions and credits.
• Talent Flexibility: Employees can be rotated or shared across multiple divisions, optimizing workforce utilization.

Challenges and Risks to Consider

When evaluating whether one GST registration can be taken for multiple businesses, it’s important to keep in mind the potential challenges and risks:

• Brand Confusion: Having too many different businesses under one name can confuse customers.
• Difficulty in Fundraising: If you need to raise capital for just one business, investors may be hesitant since finances and risks are tied together under a single company.
• High Compliance Burden: Managing businesses in very different industries can create a complex web of rules, licenses, and regulatory requirements, increasing administrative effort.
• Shared Liability: Legal or financial issues in one business can impact all other businesses under the same company.
• Accounting Complexity: Tracking revenue, expenses, and profits for multiple businesses under one entity can be challenging and prone to errors.
• Limited Exit Options: Selling or spinning off a single business may be complicated if it’s legally intertwined with other divisions.
• Regulatory Restrictions: Certain sectors may require separate registrations, licenses, or approvals despite being under one company, limiting operational flexibility.

Best Practices for Managing Multiple Businesses

When running multiple businesses under one limited company, following structured practices can help ensure smooth operations and compliance:

• Plan Ahead: Make sure your company’s MoA (Memorandum of Association) is broad enough to cover all your business plans.
• Keep Separate Records: Maintain distinct accounts for each business line to understand performance clearly.
• Review Regularly: Monitor all legal and financial obligations consistently to avoid missing any compliance requirements.
• Get Expert Advice: Consult a professional before starting a new business under your company to determine the best structure and ensure adherence to regulations.

Final Thoughts

Operating multiple businesses under one limited company is a popular way for entrepreneurs to streamline operations and cut costs. This model allows shared resources and simpler compliance, but the legal implications of multiple businesses under one company can be risky. If one business fails or faces legal action, the entire company’s assets are exposed.

For those with diverse or high-risk ventures, a holding company structure for multiple businesses is often safer. By creating separate subsidiaries under a parent company, you protect each entity from the liabilities of the others.

Ultimately, the choice between running multiple businesses under one limited company or opting for a holding company structure depends on your risk tolerance and growth goals. Consulting a professional ensures you pick the structure that best safeguards your assets while supporting expansion.

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Frequently Asked Questions (FAQs)

1. Can I run multiple businesses under one private limited company in India?

Yes, it is legally possible. Your company’s Memorandum of Association (MoA) must permit the business activities you want to start. If the new business is not listed, you can amend the MoA with approval from the Registrar of Companies (ROC).

2. Do I need a separate GST number for each business?

No, you do not. If all your businesses are located in the same state and are under the same company, you only need one GST registration. You would only need separate registrations for businesses operating in different states.

3. Is it better to set up a holding company for multiple businesses?

A holding company structure for multiple businesses is generally a better choice if you want to isolate legal risk. It is more complex and costly to set up, but it protects each business from the financial and legal problems of the others.

4. Can unrelated businesses (like IT services and a food business) be operated under the same company?

Yes, they can. However, you must ensure your company’s MoA is updated to include all activities and that you have all the necessary licenses and permissions for each business.

5. What are the legal implications of multiple businesses under one company?

The main legal implication is shared liability. If one business line faces legal trouble or debt, the entire company is held responsible. This means the assets of all your businesses could be at risk.

6. How can I raise funding for a specific business vertical?

Raising funding for a single business line within a larger company can be challenging. Investors may prefer a separate legal entity for a clear valuation. You might need to either spin off the business or use very detailed financial reports to show its specific profitability.

7. What’s the difference between a holding company and a single company with divisions?

A single company with divisions is one legal entity, so all businesses share liability. A holding company structure for multiple businesses is a parent company that owns separate subsidiary companies. Each subsidiary is a separate legal entity, which isolates the risk.

8. How is tax liability handled for different business lines under one company?

Tax is calculated on the total income of the entire company, not on each business line. You file a single income tax return for the entire company. You must, however, maintain separate financial records for each business line for internal reporting and profit tracking.

9. Is it difficult to switch from a single company to a holding company structure later?

Yes, it is a complex and time-consuming process. It involves creating new legal entities and legally transferring assets and liabilities from the original company. It’s often more efficient to plan the correct structure from the beginning.

10. Can an LLP (Limited Liability Partnership) run multiple brands or businesses?

Yes, an LLP can also run multiple brands or businesses under one legal entity, similar to a private limited company. The process and considerations, including shared liability and the need for a comprehensive partnership deed, are very similar.

11. What are the best practices for managing multiple businesses under one company?

You should maintain separate books of accounts for each business to track performance. It’s also important to have a broadly-worded MoA to avoid legal roadblocks when expanding. Always consult with legal and financial experts to ensure proper compliance and risk management.

12. What happens if one business line faces a lawsuit under a single company?

The lawsuit would be filed against the parent company, not just the specific business line. The assets of all businesses under the company are at risk, and a legal judgment could impact all of your operations. This is why entrepreneurs with high-risk ventures often choose the holding company structure for multiple businesses to protect their other assets.

How do you add a new business activity to a company’s MoA?

To add a new business activity, you must amend the company’s Memorandum of Association (MoA). This requires a special resolution passed by shareholders in a general meeting. The company must then file Form MGT-14 with the Registrar of Companies (RoC) to register the change and obtain approval.

Is it better to start a new company or run multiple businesses under one?

Running multiple businesses under one company is simpler and cheaper to manage. However, starting a new company is better for liability protection, as it isolates financial and legal risks. A separate company also helps with distinct branding and makes it easier to sell or raise funding for a single business.

Do I need a separate GST number for each business?

You only need one GST number per state for a single legal entity. However, if your company has different business verticals in the same state, you can voluntarily apply for separate registrations for each vertical. If your businesses are in different states, a separate GST registration is mandatory for each state.

Can investors fund only one division of my company?

Typically, investors fund the entire company as a single legal entity, not just one division. To attract funding for a specific division, you can create a subsidiary company. This new entity can then receive investment directly, allowing the investor’s funds to be used exclusively for that division and protecting the main company’s assets.