MEMORANDUM
TO: Owner
From:
RE: Business Options
Date: September 27, 2015
_______________________________________________

Changing the way you structure your business can be a frightening endeavor. You have been operating as a Sole Proprietorship for quite some time now, but it appears you have outgrown that business type. You have expressed a need to scale the business as well as a concern for your own personal liability. With those concerns in mind as well as the current state of your business, I recommend restructuring the business into a Limited Liability Company. I will try and address each of your concerns individually and explain how I came to this conclusion.
As your business grows you will be opened up to substantial risk, should you decide to remain a Sole Proprietorship. You have expressed concern over debt and liabilities of the business. As an LLC you can protect your personal assets from future risk. Heaven forbid your business sustains a serious debt or claim that it isn’t capable of paying, but if does, your house, car, and personal possessions are safe from any business creditors.
As an LLC you will continue to be taxed as a Sole Proprietorship with the ability to adapt to the future status of the business. You will not pay taxes on the income of the business; however profits and losses will pass through to you and be taxed on your own personal income tax returns. Should you take on another owner in the future, you will transition to be taxed as a General Partnership. If that happens, you will be splitting the business income based on your LLC Operating Agreement and each member will report those earnings on their own personal tax return. If you continue with plans to expand your business into neighboring states, you will be required to file for a Foreign Qualification in those states. This process is fairly straightforward but