Advice wanted: What business structure to use

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Advice wanted: What business structure to use

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smokehouse

posts: 9

Jul 22, 2008 1:43 PM ET Quote Report Abuse

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We are in the final planning stages of our business and I originally thought I would go with a sole proprietor business but after some research decided that that would probably not be the best thing for a restaurant. Would a limited liability company be our best bet then? I welcome all advice given

SherylCPA

posts: 69

Jul 22, 2008 3:08 PM ET Quote Report Abuse

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You said "we" so I`m assuming that there`s more than one of you. In that case, you can`t be a sole proprietorship. If you are husband and wife and each own part of the business, the IRS requires you to file as a partnership unless you elect to be taxed as a joint venture.

The decision whether or not to incorporate or form an LLC will depend upon your individual and family situation as well as your business plan.

The various business structures differ in how they allow you to raise money, protect your assets, manage your company, and pay salaries and fringe benefits.

So the choice of what`s the best structure for you depends on a lot more than the fact that you want to be in the restaurant business. You would definitely benefit from the advice of an attorney and accountant who are familiar with these issues.

smokehouse

posts: 9

Jul 22, 2008 3:44 PM ET Quote Report Abuse

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It will be my husband and I running the restaurant, but I will be the sole owner for a number of reasons. I guess I was thinking that I didn`t want to do a sole proprietorship because I had read that then you are fully responsible for basically anything. I guess I was thinking about injuries more then anything when I read that, but now that I think more about it, insurance should be responsible for that, not the owner.....right?

SherylCPA

posts: 69

Jul 22, 2008 4:29 PM ET Quote Report Abuse

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If you have any employees, you`ll have to get a worker`s comp policy to cover them. You`ll also want various types of liability insurance and business auto coverage. An independent insurance agent in your local area should be able to explain this all to you.

As a sole proprietor you WILL be responsible for all of your business debts. If you were to form a single owner LLC or a corporation where you owned 100 % of the stock, you MIGHT NOT be personally liable for all of the business debts. That depends on whether or not you`ll have to personally guarantee them. Most business owners in the startup phase have to do this, so just be aware of the consequences.

You didn`t ask about payroll, but I feel obligated to tell you that it can get tricky in the restaurant business, so be sure to learn as much as possible about it before you get started and get professional help if you need it from a good accountant or payroll service.

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Advice wanted: What business structure to use

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