legal structure

[A_Westerlund]

Hello everyone,

I was wondering if anyone could give me some insight on which legal structure is best for my microbrewery. Any personal examples or explanations would be very useful. As of now it seems that an LLC, is the best option (with three partners and maybe a handful of investors). Thank you!

Andrew

[anda]

Andrew -
It depends on which state you are in. And, of course the answer can get complicated depending on your particulars .... Here's a very quick short answer: Usually, the LLC option has less filing and annual meeting requirements than a corporation does. Also, there are generally less annual fees with an LLC (depending on your state). LLC members also get pass through tax benefits. The other option for a small company is the corporation, but file an S election with the IRS so you are taxed like an LLC (this is easy to do online). But all of your investors in the S Corp must be live persons (not trusts, for example), and there is a limit on the number of investors (75, I think). Then you get the tax benefits of the LLC, and the other benefits of a corporation.

If you are setting this up yourself, read the information you find on your secretary of state's web page - you'll be able to see what requirements you'll need to meet with each entity, and what the fees are.

There is a lot of information on the internet as well about benefits of either entity option. Most secretary of state sites are useful enough, so you can incorporate yourself, and not pay additional fees to sites like legalzoom. If you are already working with a lawyer, ask him or her what would be best for your particular situation.

We chose the corporate entity for our brewery because it is easier to sell shares to investors later down the line (versus membership interests), it is easier to create different levels rights among investors, and it is easier to merge into other entities. We also filed the S election to get the tax benefits.

Good luck!
-Anda
www.legalbrewing.com