Businesses with distinct operations or assets frequently separate them into different entities to contain liability.

Holding company structure. A parent owning operating subsidiaries. Liability is contained within each subsidiary provided the separations are respected.

Series LLC. Available in a number of states, permitting designated series within one entity, each with its own assets, members and liabilities, and statutory limits on inter-series liability. The uncertainty is how a series will be treated in a state that does not recognize them, and in bankruptcy — which argues for separate entities where the assets are substantial.

Making separation effective. Separate books, bank accounts and tax identification; separate contracts signed in each entity’s name; assets titled correctly; intercompany arrangements documented at arm’s length with written agreements; separate insurance or a clearly allocated shared policy; and no commingling of funds.

Common failures. One bank account used for everything; leases and contracts in the wrong entity’s name; employees of one entity working for another without a services agreement; and guarantees that make each entity liable for the others, which defeats the structure entirely.

Tax. Structures should be designed with a tax adviser, since the entity choices that provide liability separation can create unwanted tax consequences, particularly on later restructuring.