Does this setup make sense?

[pedros]

Hello all,
First of all I am really glad I have found this community. Looks like a fantastic place for people that know very little about accounting to get some advice.

My query might prove to be bit difficult to explain, but will try my best.

I have incorporated 2 companies in Delaware, US. The first one was incorporated 2 years ago and the last one only a couple of months ago.

Both companies have a web based product, and both products are completely different from one another, so no cross-over is intended.

I have not requested an EIN for any of the companies, and I have been paying from my personal account all of the expenses of each project. (staff, servers, domains, and so on)
I own 100% of the shares of each company, and the teams that’s work to deliver the projects for each brand are the same.

None of the companies are making any money yet, as we have not launched the monetization channels yet on purpose. Having said that I perceive that one of them is going to be starting to make money very soon.

Seeing as the base for these 2 projects is the same, same suppliers, same expenses, and so on, I would prefer to have one single identity manage all the expenses, which lead me to think that setting up a company that acted as a holdings company for these 2 companies and potentially others that were created along the way made sense.

So company A would own companies, B, C and other companies that would eventually be created. All payments, invoices and so on would be under the holdings company.
So my question is, is this setup common? Is there any legal or tax related challenge that I am missing? Is there any disadvantage to this setup?

Many thanks in advance

 

[kirby]

First of all, the law says that if you have a corporation you must have an employer id number for it.
Second, whether the corporation has income or not an annual tax return must be filed or else there are penalties. So i hope you have been doing that.
Instead of adding a third company you could accomplish the same thing by having one of your two companies handle everything then bill the other company for its services.

 

[pedros]

Thank you very much Kirby.

I have filed through my incorporation agent the annual tax returns even-though no income has really been reported.

I am however concerned about something you mentioned. We did not ask for an EIN for any of the companies, is this not legal?

Many thanks

 

[kirby]

Not legal whether it is a c or s corp. do a websearch on " do you need an ein" to go to the irs site which defines this.

 

[pedros]

Not legal whether it is a c or s corp. do a websearch on " do you need an ein" to go to the irs site which defines this.

Thank you very much for highlighting this. Getting this resolved immediately.

 

[kirby]

and don't forget you need to file both Delaware and Federal annual returns.