To: Company Owner
Date: December 17, 2014
Subject: Recommending Business Type
According to the information that I have received, I have concluded that a Limited Liability Company(L.L.C.) will suit your business the best. An LLC will offer the liability protection that means so much to you, as well as offering you the best opportunity to bring in other partners for gaining capital. Profits and control would be equally divided among all the partners, according to the operating agreement and articles of organization.
Formation and Characteristics
The formation of an LLC is quite simple. Articles of organization and an ...view middle of the document...
All owners will only be liable for the money that they have invested into the business. This will also ensure that all personal assets are protected from lawsuits or bankruptcies. Control and profit are other key factors in making this decision. Control in the business depends on how management control was set-up in the operating agreement. Profits are divided among the owners, according to the interest invested in the company. Income taxes for an LLC are passed-through to the owners, and then each owner would file their taxes based on their share of the profits. I know that you will be looking to expand in the future. So with this type of business, you would be able to expand and grow without many obstacles. The only requirement would be making sure that the majority of the owners agree to expand. Finally, the only drawback to this business is if an owner dies, retires, or withdrawals, then the business would essentially cease to exist from that point. The only way to avoid this would be to write into the operating agreement that the business could continue if an owner does leave the company.
With the current size and possible expansions in the future, I feel that an LLC will best suit your overall needs. It has the profit retention and management control that was important for you, along with the liability protection that is vitally important. This type of business will also save you from paying double taxes, such as in a C-corporation.