Posted on October 3rd, 2019
Below is a complete transcript of this video.
What’s up fellow entrepreneurs? It’s John Fagerholm again, and today I wanted to talk about the importance of separating your businesses if you have more than one business.
I usually see this with restaurant owners. A lot of times restaurant owners will have multiple restaurants. So most people know to make each restaurant a different LLC or corporate entity, but then they assume that that’s enough protection. But it isn’t. And where the risk lies is in this doctrine called enterprise liability, basically.
And the way California handles enterprise liability is they say that if you have similar businesses, so restaurants would be similar, and it’s the same owners, and you share employees, it’s the same business. It’s not different. So you have to have all of those things, but it’s very easy to do.
If you’re an entrepreneur and you have four restaurants and then one of them is busy and the other one is not, it seems like common sense to say, “Hey Joe, can you work over here instead of over there today?” Well, unfortunately, that is a risk.
So if one restaurant, let’s say the poor performing restaurant, gets sued for some reason, and even if that’s a dying restaurant, and you say, “Go ahead. Sue it. There’s nothing there anyway.” Well, unfortunately, because of enterprise liability, if you’ve made the mistakes I just laid out, then they’ll say, “Well, you’ve got four restaurants. So all of them are liable.”
And the other bad part about enterprise liability is that if you have a restaurant … You have three restaurants, you have 10 employees each.
Well, you’re treated differently by both federal law and state law if you only have 10 employees. Now, if there’s enterprise liability, suddenly they say you have 30 employees because this is all part of the same enterprise.
Well, now you’re treated completely differently. So, that’s why it’s important.
So, if you have more than one business, just make sure you’re not breaking those rules. If it’s a similar enterprise with the same owners, make sure you’re not sharing employees.
All right. Fellow entrepreneurs, until next time.
