After much consideration and research into the different business forms that would work for you, I believe that it would be most beneficial for you to form Jorgenson Cabinetry into an LLC, Limited Liability Company. My belief that an LLC would serve you best is based on the following criteria which you deemed important in our discussions.
As a member of an LLC, you would not be personally responsible for the business debts or liabilities. All liability would lie with the company; therefore your personal assets would be secure and separate from the business holdings.
Profit Retention/Profit Sharing:
An LLC allows for IRS “pass-through” taxation. It is not subject to business tax as the profits would be deemed the personal income of the members. This would allow Jorgenson Cabinetry to avoid a double taxation of business and personal tax. You would need to claim any profits that you receive from the company on your personal tax return only. If you decide to add members to the LLC, the profits may be specially allocated on a basis other that ownership percentage. Therefore you could add capital investment by the addition of members without having to give up a majority of the profits.
The requirements for the formation of an LLC vary state to state. However for the majority of the states you simply need to file an article of organization with the state agency in charge of business regulation. Some states require a yearly franchise fee, which in turn gives you the liability protection.
The departure of a member of the LLC does not automatically lead to dissolution of the company. The remaining members may elect to transfer membership or they may also “buy-out” the departed member’s share of the company.
An LLC is regulated much less stringently than other forms of business, such as S Corporation and C Corporations. The administrative paperwork and record keeping requirements are much less in an LLC.
Control of Company:
With an LLC you