To: Owner
From:
RE: Business Type
Date: October 8th, 2012
Changing the type of business structure is not a small consideration. You have operated for years as a Sole Proprietorship, but it appears that you have outgrown that particular business type and may benefit from changing to a different type of business.
Based upon our previous conversation, I will summarize my interpretation of your business concerns in the bullets below:
• Liability. You are concerned about operational liability of the employees handling work on your behalf, as well as your personal liability for the operations and debts of the organization.
• Geographic Expansion. You are thinking about expanding to another state, and need a business type that allows you to operate in both states.
• Capital Expansion. You will need to raise funds in order to pay for the expansion.
• Control. You would like to retain control of the company.
• Profit. You are concerned about how profit will be shared if you take on partners, and how you will be taxed on the profit of the organization.
• Continuity. You are concerned about how the business will continue to operate if you pass away.
I cannot recommend continuing as a Sole Proprietorship or to start operating as a Partnership based on the concerns listed above. Neither of those business types will address the liability, profit, or continuity issues.
A C Corporation or S Corporation would handle many of those issues, however, the expense and ongoing difficulty of running a Corporation make it a less attractive option. Also, since you are used to operating as a Sole Proprietorship the additional ongoing regulatory and compliance requirements of running a corporation can seem immense.
I recommend that you reorganize the business as a Limited Liability Company. Organizing as an LLC will address your liability concerns by separating your personal liability from the liability of the business. If the