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And now I am creating a content-rich site with numerous online magazines. This second site also has its own catalogue and shopping cart.
Will G penalize me for a loose affiliation if Site #1 links to Site #2?
I do not need to link Site #2 back to Site #1.
It would be daft to start over if you have a place where the new site can call home that is already well ranked by google, could also get interest from regular visitors to site 1.
Just a thought.
Just remember that Google is not as easily impressed these days if you have lots of links coming from one source, or a limited number of sources.You'll need to cultivate links from a variety of sites besides your own, the more the better.
This is very rare, but does happen. If you are not focusing on a highly monetized keyword, then I would not worry about it. Also, it is very unlikely that linking like that could ever hurt you. It is possible G could just devalue the links, but I doubt it could ever have a large negative affect as long as you are doing it with the correct intentions.
Sites I refer to in that example are hosted in two different countries.
Prairie.