For example, if one is in the business of making bricks and decides to enter the business of making flooring, the one may decide to establish a new business entity to keep the existing business out of the risks of a new one. That makes perfect business sense.
How is it possible?
The problem is that most of government funding programs require the applicant to demonstrate track record of business performance and profitability for at least 2-3 years prior to the application. It means not to be incorporated for 2-3 years (though it is important), but to be profitable for 2-3 years in a row. Can a newly registered company meet this requirement? Obviously not.
A client of ours has recently bumped into this wall. The client established a new company and intended to purchase a building and equipment, and hire 12 new employees to enter the new niche market targeting same customers with a completely different product. Regrettably, the project did not meet eligibility criteria. It did not even matter that existing and new business entity shared the same ownership and that the existing company pays the bills.