Unifying your businesses into one corporate entity

Ask Fortune Small Business helps a serial business owner turn his enterprises into subsidiaries of one company.

David, Arlington, Texas
I have several startup businesses. I would like to form one umbrella entity and include them all as subsidiaries of this entity. What's the easiest way to do this?

By Emily Maltby, Fortune Small Business staff writer

Dear David: The short answer is "call your CPA and your attorney and let them guide you through the process." But there are steps you can take on your own to expedite the process.

Presuming you already have supporting documents for each of your companies, take some time to get your paperwork in order.

"At the very least, check that you have easy access to your tax returns, bank account statements and employer identification numbers for each of the companies," recommends James Evans, assistant regional Director at the Small Business Development Center at the University of Houston.

When you approach your lawyer with this information, he or she will most likely create a corporate book for each entity. But if you are feeling ambitious, you can start assembling the book by yourself. Austin-based small business attorney Joe Fulwiler recommends opening with the company's certificate of formation, followed by the regulations, or bylaws, of the company. The next section should be designated to bank account information, stock certificates and all other documents that memorialize loans or deals. Finish the book with issuances of ownership in the company. Fulwiler suggests consulting TenMinuteMentor for more information on how to build a corporate book.

With the paperwork in order, it's time for the initial filing – the step at which most business owners require an attorney and an accountant. "You should discuss with your lawyer and CPA how you want to establish your parent company," says Randy Burton, Partner at Houston's Burleson Cooke law firm. "My experience is that the vast majority of parent companies are C-corps and their subsides are C-corps ,but it doesn't have to be that way. LLCs can hold the shares of stock of other entities, and that may be more favorable to you for tax and other reasons." (For more information, see "Which corporate structure is best?")

DIY paperwork
Still ready to go the next step alone? It's getting increasingly simple to create a corporation. You can pay a filing fee of $300 in the state of Texas to create articles of the organization and fill in a more complex secondary document called the "regulations or company agreement," which you can find at online business service SOSDirect.

But for all you lone riders out there, heed Burton's and Fulwiler's warnings of troublesome, complicated phases of the process, such as setting up the company to go public. Or, for another example, there's the sticky area of transferring stock to the parent company. (If you're not careful, this could look like a sale and you will be taxed.)

"And the list of common problems goes on," Burton says. "After compiling the first documents and paying the first filing fees, there are some momentous decisions that need to be made. It's wise to get some legal and tax advice on what makes the most sense for you. Don't do your own brain surgery – it'll come back to haunt you."

This column provides general information only and is not intended to replace the services or legal advice of an attorney. Always consult a lawyer regarding any specific legal concerns, as laws vary from state to state.