Adding a Division to a Business

Founders of a successful business venture often look to capitalize on their success by expanding into another business or adding a division. The specific approach you take often depends on the existing structure of your business, the nature and purpose of the new business, and your financial objectives. Typically, it is wise to consult with a finance or accounting expert when making a specific decision.

A new business division is essentially a part of the company the operates separately from the primary business, but it is legally under the parent business umbrella. To tie a division to the parent company, the statement "a division of" is often used. In manufacturing, a company might have separate divisions that work on various types of projects or products. In a resale businesses, different divisions might sell distinct types of goods and services.

Many small businesses are established as limited liability companies, or LLCs, to take advantage of the reduced personal asset liability for owners. If you want to grow the business without establishing another LLC or new business structure, you can add a division to the LLC. This process is typically simpler than establishing another LLC. You often just have to complete basic paperwork to file the new legal name and related trademarks with your state. It is a bit more complicated if you add new owners or change the financial structure with the new division. You may have to also amend your original LLC operations paperwork.

The process to update your business with a new division is often very similar in each state. S Corporations and C Corporations generally require updated state registration paperwork. The primary reason that you have to formally register the new division as a separate entity in name is because of state laws on "fictitious" use of names. You can't operate under a name that is not your own without formally registering it with the state. Thus, if you operate a division under a different name or trademark than the parent company, you have to formalize the name use.

When deciding whether to add a division or simply diversify within the existing business, marketing and branding considerations are important. If you want the new division to function as a separate but connected entity to leverage the brand reputation of the parent company, a division setup makes sense. If you want the new operation to function distinctly from the parent company, and even intentionally isolate it, a separate business entity might work better.