Sole Propriertorship or LLC (Limited Liability Company)

Discussion in 'Professional Catering' started by sambehnam, Sep 11, 2005.

  1. sambehnam

    sambehnam

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    Hi,

    I'm starting small a catering/personal chef business. I am getting different opinions on if I should register my business as LLC or Sole! How do most caterers start? Has anybody ever faced a law sute or any major confrontation with clients?n Your advise would be highly apprciated.

    Best regards

    Sam Behnam
     
  2. panini

    panini

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    Sam,
    When starting something like this it is alwaysw good to spend the monies to buy a couple of hours from an attorney or business CPA. If your concerned about possibilities in being sued then I would definately research liabilty insurance. People sue all the time in the states. If you are a sole propritor you are definately exposing your personal assets.
    hth
    Pan
     
  3. kentlphilli

    kentlphilli

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    Sam,
    5 years ago I purchased a specialty meat business (Venison America) and was faced with the same questions. My attourney and accountant both agreed that the LLC was the better choice in my case. This can be dependendent on may things not the least of which is your income tax situation.

    I like the LLC because it protects my personal assets which is not the case with a sole prop. I also think this may be best for you because, as you know, in the food business you are at high risk for law suits. Why take the chance.

    As owner of an LLC your wages are not considered payroll but rather a distribution of equity. This has some interesting implication to your personal tax situation as well as that of the LLC. It is best if you discuss these with a tax accountant so that you can plan. Also, find an accountant that is willing to work for you and not just a person who re-records the information you give him. A working accountant can save you big bucks but a re-recorder is nothing more than another expense. Good luck!
     
  4. david jones

    david jones

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    First, there is no substitue for qualified legal and tax advice - good lawyers and accountants. That said, I will give you my advice as a 22 year veteran in restaurants, having launched a lot of great places in Chicago.

    The sole proprietorship is the worst possible way to organize a business that may have issues some day related to negliegence or liability. All of your personal assets, present and future, may be at risk. Forget it.

    The LLC is a contemporary, beautiful way of organizing a small (or large) business. Simply speaking, an LLC has all of the advantages of a Partnership (taxed once at the ownership level, control and cash distribution as determined by an agreement instead of raw number of shares owned) and it has the advantages of a corporation (individuals are typically safe from personal liability, investors are only at risk for the amount they've invested). The beauty of an LLC is that you (as the owner) can dictate the terms in which your investors are paid back, who is in charge, etc., etc.

    I saw a post that argued that LLC distributions were taxed at a lower rate than owner salary. BS. Check with your tax advisor on that one. Big land mine.

    If you need help call 773-620-345
     
  5. david jones

    david jones

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    First, there is no substitue for qualified legal and tax advice - good lawyers and accountants. That said, I will give you my advice as a 22 year veteran in restaurants, having launched a lot of great places in Chicago.

    The sole proprietorship is the worst possible way to organize a business that may have issues some day related to negliegence or liability. All of your personal assets, present and future, may be at risk. Forget it.

    The LLC is a contemporary, beautiful way of organizing a small (or large) business. Simply speaking, an LLC has all of the advantages of a Partnership (taxed once at the ownership level, control and cash distribution as determined by an agreement instead of raw number of shares owned) and it has the advantages of a corporation (individuals are typically safe from personal liability, investors are only at risk for the amount they've invested). The beauty of an LLC is that you (as the owner) can dictate the terms in which your investors are paid back, who is in charge, etc., etc.

    I saw a post that argued that LLC distributions were taxed at a lower rate than owner salary. BS. Check with your tax advisor on that one. Big land mine.

    If you need help call 773-620-3450