# Best structure for multi owner company. **URL:** \ **Category:** Factual Questions\ **Created:** [July 14, 2007, 7:11pm UTC](https://boards.straightdope.com/t/best-structure-for-multi-owner-company/411780 "2007-07-14T19:11:13Z")\ **Posts on this page:** 8\ **Page:** 1
**Author:** ![drachillix](https://avatars.discourse-cdn.com/v4/letter/d/48db29/32.png) [@drachillix](https://boards.straightdope.com/u/drachillix)\ **Post date:** [July 14, 2007, 7:11pm UTC](https://boards.straightdope.com/t/best-structure-for-multi-owner-company/411780/1 "2007-07-14T19:11:13Z")
My business has in the space of 20 months or so expanded to where I need help. In my case, the best scenario looks like taking on a partner since the #1 guy I am considering I pretty mcuh cannot afford as an employee but as a partner his potential rewards are much better. I have no worries about trust or skills, we have already discussed and agreed to doing this, its now just a matter of how to structure it legally. Its a computer shop/onsite computer repair provider in CA if it matters. Doper thoughts on the best way to handle this? What are the +/- to LLP/LLC over standard liability scenarios. ---
**Author:** ![Moriarty](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/moriarty/32/49_2.png) [@Moriarty](https://boards.straightdope.com/u/Moriarty)\ **Post date:** [July 14, 2007, 9:20pm UTC](https://boards.straightdope.com/t/best-structure-for-multi-owner-company/411780/2 "2007-07-14T21:20:10Z")
Obviously, a local attorney is your best source of information. Generally, though, a limited liability company is popular because it provides the liability protection of a corporation (i.e. it is difficult to sue you personally for company actions, or to reach your personal assets to settle company liabilities) but also offers the “pass through” taxation of a partnership (i.e. you only pay income tax at the personal level, and there is no corporate income tax, as with a corporation). As with any legal issues, though, your state’s laws may mean YMMV (hence, the local lawyer) ---
**Author:** ![whatami](https://avatars.discourse-cdn.com/v4/letter/w/85f322/32.png) [@whatami](https://boards.straightdope.com/u/whatami)\ **Post date:** [July 14, 2007, 10:53pm UTC](https://boards.straightdope.com/t/best-structure-for-multi-owner-company/411780/3 "2007-07-14T22:53:32Z")
I work in commercial banking and see a lot of LLCs and LLPs (more LLCs). The part I can speak to is lending. If you plan to do any borrowing, you’ll probably have to personally guarantee any loans or lines of credit (as will your partner). Of course, the same goes for most corps we deal with as well. ---
**Author:** ![ZipperJJ](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/zipperjj/32/211_2.png) [@ZipperJJ](https://boards.straightdope.com/u/ZipperJJ)\ **Post date:** [July 15, 2007, 4:19am UTC](https://boards.straightdope.com/t/best-structure-for-multi-owner-company/411780/4 "2007-07-15T04:19:35Z")
I have a business that is owned by 2 of us and it’s an LLC. When we signed the paperwork and stuff, the lawyer had us set it up so that my partner owned 51% and me 49% so that we wouldn’t have to coordinate schedules to sign everything together. So far life has been easy-peasy as an LLC. We pay regular withholding tax on our paychecks and regular income tax on the business. In the 6 years we’ve been set up, I’ve been able to sign most everything myself (I take care of the money end of things). Uncle Sam does not care that I only own 49% and I sign all the tax documents. When we sign up for credit cards or lines of credit, our personal credit histories do come in to play. I was able to get our last cards on my credit alone, though. My partner was in the middle of obtaining a mortgage and didn’t want the credit hit - so we put it all under my name and my credit and just assigned him as a authorized user. Previously we had signed up for a Small Business Line of Credit and we did both have to have credit checks. Also, I recall one time we nearly got into a hassle with taxes and our accountant assured me that if we owed some taxes and the LLC couldn’t come up with the money, we (my partner and I) would be personally responsible for it. Unfortunate for you and fortunately for me, we haven’t had any money troubles, tax troubles, legal troubles or personal troubles that would give me more insight on the benefits and drawbacks of an LLC to pass along to you. ---
**Author:** ![jimmmy](https://avatars.discourse-cdn.com/v4/letter/j/73ab20/32.png) [@jimmmy](https://boards.straightdope.com/u/jimmmy)\ **Post date:** [July 15, 2007, 1:34pm UTC](https://boards.straightdope.com/t/best-structure-for-multi-owner-company/411780/5 "2007-07-15T13:34:36Z")
If you trust Wiki to make Financial and Legal choices you will end up broke and in the electric chair. Just so we are clear. To me LLP’s are what Doctors and Lawyers etc. do and not 2 Computer Tech guys. And Wiki says: \*Although found in many business fields, the LLP is an especially popular form of organization among professionals, particularly lawyers, accountants and architects. In some U.S. states (including California and New York), LLPs can only be formed for such professional uses. \* > **[Limited liability partnership | United States](https://en.wikipedia.org/wiki/Limited_liability_partnership#United_States)** > > In the United States, each individual state has its own law governing their formation. Limited liability partnerships emerged in the early 1990s: while only two states allowed LLPs in 1992, over forty had adopted LLP statutes by the time LLPs were added to the Uniform Partnership Act in 1996. > The limited liability partnership was formed in the aftermath of the collapse of real estate and energy prices in Texas in the 1980s. This collapse led to a large wave of bank and savings and loan failures.... I think you need a Lawyer but a General Partnership or Incorporating - Including an LLC – is something else to explore. I would also explore whether two Computer Tech guys should be worried about Liability as a first concern rather than Taxes. I would speak to a good expert Lawyer. ---
**Author:** ![Gfactor](https://avatars.discourse-cdn.com/v4/letter/g/9de053/32.png) [@Gfactor](https://boards.straightdope.com/u/Gfactor)\ **Post date:** [July 15, 2007, 2:20pm UTC](https://boards.straightdope.com/t/best-structure-for-multi-owner-company/411780/6 "2007-07-15T14:20:41Z")
Here are some discussions of some of the issues: [http://www.toolkit.com/small\_business\_guide/sbg.aspx?nid=P12\_4265](http://www.toolkit.com/small_business_guide/sbg.aspx?nid=P12_4265) [http://www.mynewventure.com/Question49\_LLC\_vs\_LLP\_S\_corp\_C\_corp](http://www.mynewventure.com/Question49_LLC_vs_LLP_S_corp_C_corp) [http://www.mynewventure.com/Question36\_LLC\_vs\_LLP](http://www.mynewventure.com/Question36_LLC_vs_LLP) [http://www.wikicpa.com/index.php/LLC\_vs.\_LLP](http://www.wikicpa.com/index.php/LLC_vs._LLP) Here is the California statute on LLPs: [http://www.leginfo.ca.gov/cgi-bin/displaycode?section=corp&group=16001-17000&file=16951-16962](http://www.leginfo.ca.gov/cgi-bin/displaycode?section=corp&group=16001-17000&file=16951-16962) and LLCs: [http://www.leginfo.ca.gov/cgi-bin/calawquery?codesection=corp&codebody=&hits=All](http://www.leginfo.ca.gov/cgi-bin/calawquery?codesection=corp&codebody=&hits=All) (it’s broken out into sections in the index). There are also some good books around on choosing an entity. Remember, too, that you can often control some aspects of the entity that you choose by choosing the state in which to create the entity. e.g., > [@](#): > > 1. (a) (1) The laws of the jurisdiction under which a foreign > limited liability partnership is organized shall govern its > organization and internal affairs and the liability and authority of > its partners, subject to compliance with Section 16956, and (2) a > foreign limited liability partnership may not be denied registration > by reason of any difference between those laws and the laws of this > state. It’s definitely worth spending some time talking to a lawyer about the choice, even if you do the setup yourself. ---
**Author:** ![Khadaji](https://avatars.discourse-cdn.com/v4/letter/k/9e8a1a/32.png) [@Khadaji](https://boards.straightdope.com/u/Khadaji)\ **Post date:** [July 15, 2007, 2:25pm UTC](https://boards.straightdope.com/t/best-structure-for-multi-owner-company/411780/7 "2007-07-15T14:25:13Z")
When I formed a company our lawyer recommended an LLC. However, I later found out that the primary reason he did this is because he wanted the experience. My accountant didn’t like the LLC. She said that too many of the tax laws are ambiguous in regards to an LLC. In her opinion a sub chapter S corp had all of the advantages of an LLC without the ambiguity. I would get opinions from both a lawyer and an accountant if I were going to do it again. ---
**Author:** ![Gfactor](https://avatars.discourse-cdn.com/v4/letter/g/9de053/32.png) [@Gfactor](https://boards.straightdope.com/u/Gfactor)\ **Post date:** [July 15, 2007, 2:36pm UTC](https://boards.straightdope.com/t/best-structure-for-multi-owner-company/411780/8 "2007-07-15T14:36:56Z")
[QUOTE=jimmmy] \*Although found in many business fields, the LLP is an especially popular form of organization among professionals, particularly lawyers, accountants and architects. In some U.S. states (including California and New York), LLPs can only be formed for such professional uses. \* [/QUOTE] Right: > [@](#): > > Limited liability partnerships are entities that shall engage in the practice of public accountancy, the practice of law or the practice of architecture. A limited liability partnership shall have two or more licensed partners. [Business Programs :: California Secretary of State](http://www.sos.ca.gov/business/llp/llp_faq.htm) and because of that, CA imposes some pretty serious financial requirements on LLPs: > [@](#): > > 1. (a) At the time of registration pursuant to Section 16953, > in the case of a registered limited liability partnership, and > Section 16959, in the case of a foreign limited liability > partnership, and at all times during which those partnerships shall > transact intrastate business, every registered limited liability > partnership and foreign limited liability partnership, as the case > may be, shall be required to provide security for claims against it > as follows. . . [http://www.leginfo.ca.gov/cgi-bin/displaycode?section=corp&group=16001-17000&file=16951-16962](http://www.leginfo.ca.gov/cgi-bin/displaycode?section=corp&group=16001-17000&file=16951-16962)