Hi Holly,
Sop, you have two Kentico instances and each is mapped to a separate virtual application in the IIS? Or, are you running multiple sites in one Kentico and one domain? (documentation)
Anyway, for testing or development purpose it should be OK. However, if those sites will be live and they will be different web presentations, you need to have separate Kentico licenses purchased, although you will be using only one license key.