Sole Proprietorships, Limited Partnership or General Partnership

The business is currently a general partnership without a partnership agreement. Since there will be multiple owner we can eliminate sole proprietorship as an option. The liability issue for the aunts and control issues means we must eliminate a general partnership as it does not meet the aunts needs for no personal liability. It also does not provide for the boys to control the company as all partners have a voice in the business generally. We could form a limited partnership but the formation cost is generally very high in most states and it will not make raising additional capital later easier. There are much better cho

Control is an issue and the boys want control. They should put in place a shareholders agreement where they vote the aunts shares as long as dividends are paid. Thus, the aunts get money and the boys get control. The agreement should also include a repurchase agreement that binds the aunts estate. This could be done in and S or a C corp.

Thus, the remaining choices are Corporation or an LLC. The cost of forming either an LLC or a corporation are about the same in most states. First you form a corporation then you become an “S” by applying to IRS. The cost of forming an “S” corp is generally higher since in addition to the formation costs you have the compliance process with IRS to become an “S” corp. In many states the annual fees and filings for both corporations and LLC are identical. However, with an “S” you will have additional IRS filings and restrictions. Both the LLC and corp will address the liability issue for the aunts.

Some topics in this essay:
Corporation LLC, Partnership Partnership, Key Issues, Corp LLC, boys control, “s” corp, grow company, liability issue aunts, additional irs filings, preferred stock, personal liability, partnership partnership, additional irs, dividends paid, limited partnership, aunts income,