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Memorandum

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...
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