To: John Smith
From: J.K Rowling
Re: Change in business organization
Date: December 12, 2000
It is my understanding that you wish to expand your company and are curious about what business organization would best fit your needs. I have attached a brief description of the most popular forms of business organization and hope that they will help you understand the perks and drawbacks associated with each. Below I have written my suggestion as to what route you should take based on the concerns you provided with your email.
I believe that a company of your size, profitability, and future direction would be well suited to a Limited Liability Company (LLC). An LLC would allow you to enjoy the benefits of a corporation’s limited liability while also allowing you the options of being taxed like a sole proprietorship, partnership, or a corporation depending on what best fits your company. It is highly advised that you consult a qualified tax attorney to decide what type of taxation would best fit your company.
With the change to an LLC your company would become a separate legal entity and therefore give you a buffer between you and it should the business fail. As a sole proprietorship your company would cease to exist should anything happen to you but as a separate entity the business would also gain the ability to endure and continue functioning without you. This also covers any fears you have about an on site injury wiping out your personal assets by giving you and any partners (members for an LLC) limited liability. An LLC is much cheaper to start and maintain than a normal corporation since there is no need to hire a board of directors to help maintain the company. You also aren’t required to maintain the same expensive paperwork or record keeping requirements that corporations must adhere to. If you do choose to begin expanding your company with family members an LLC does