Legal Question in Business Law in California

Do sub-divisions of a company need to be incorporated as well?

Hi -

Question 1)

I was wondering if subdivisions of a parent company are required to have it's own legal entity as well (for California). For example say I wanted to start a parent company called ''Extreme Sports Gear'' as an LLC to cater to providing gear for different sports. Say one of those sports I want to be a different name. Does this subdivision need to have it's own legal entity or can it fall under ''Extreme Sports Gear''.

As illustrated:

Extreme Sports Gear - parent company (will be used for skateboarding, surfing, roller blading etc). But for the mountain bike industry we want to use a differnt name like

''ABC Mountain Bikes'' for the mountain biking industry.

Question 2). Say we use ''extreme sports gear'' as the parent company. However when catering to differnt genres of sports we'd like to use specific names like ''Extreme paintball'' for the paintball industry; ''Extreme Snowboards'' for the snowbording industry; ''Extreme skateboarding'' for the skateboarding industry and so forth. All of these are part of ''Extreme Sports Gear'' Can this be done without having to incorporate each one separately? Is it just a matter of filing a DBA for each of those? Or maybe a DBA isn't even required.

Thanks much


Asked on 3/13/06, 4:48 pm

2 Answers from Attorneys
Bryan Whipple Bryan R. R. Whipple, Attorney at Law

Re: Do sub-divisions of a company need to be incorporated as well?

The short answer is no.

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Answered on 3/13/06, 9:39 pm
Gregory Cartwright The Cartwright Law Group, APLC

Re: Do sub-divisions of a company need to be incorporated as well?

An entity, including LLCs can use dba's. However, I would strongly caution you to discuss with an attorney the appropriate entity to use in California, as LLC are rarely the right choice. Have you thought about the impact of this decision on the Gross Receipts Tax and self-employment tax? There may be better choices out there for you. If you are interested in talking about those, drop me an email.

Sincerely,

Greg

[email protected]

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Answered on 3/13/06, 5:10 pm


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