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What's better for starting a brewery LLC or S-Corp? (self.TheBrewery)

submitted ago by lumpy1981

So, my business partners and I are starting a brewery and we wondering what the best option is for forming the company and getting a tax ID. There are 3 of us and we would have a single non-bank investor up front.

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[–]FotAoS 4 points5 points ago

Depends on if you wish to have the ability to sell shares in your company. If you set up as an LLC you wouldn't have that ability, only corporations can do that. With an LLC, however, you can bring on people as members (either managing or non-managing) who contribute equity to the company.

There are other differences as well, including taxation and how the company is managed, that you can look up. LLC may be the "easier" route to go for a small company, (and you have the ability to change to an S-corp in the future) but if you foresee a future need/desire to become a corporation, consider starting off as an S-corp right off the bat.

[–]lumpy1981[S] 0 points1 point ago

Thanks for the insight. It sounds like LLC may be the best option for us at the moment.

[–]pkphy39 1 point2 points ago

We are set up as an LLC. The Articles of Organization can be a bit hairy with different classes of members, but we like the flexibility that an LLC provides.

As our accountant said, with an LLC you can "do whatever you want" - we're free to make up rules for our organization and aren't bound by the strictures to which an S-Corp must comply.

In the LLC, you don't sell "shares", you sell "membership interest".

[–]lumpy1981[S] 0 points1 point ago

Awesome, thanks for the info. It seems like an LLC is the way to go at least up front.

[–]StillAnAss 4 points5 points ago

If you don't have a CPA already then this is the time to get one. Ask them and also ask your lawyer what is best for your situation. Your tax burden can vary a lot depending on how you structure the business.

You've got lots of money sunk into equipment already, spend a few hundred dollars and get a professional opinion.

[–]stega_megasaurus 0 points1 point ago

I'm going to second this comment. I just spoke with a cpa and found huge benefits going with a s-corp instead of the LLC i set up. I work in another industry but the fact remains that I probably should have gotten a professional opinion at the outset - I would have saved a lot in taxes the past two years.

[–]pkphy39 0 points1 point ago

Very interesting, our team (legal and CPA) came to the opposite conclusion. But we are a brewery, so there's that.

I'll third this opinion. Ask your professional team. If you don't have one, assemble one.

[–]genius_in_progress 1 point2 points ago

Disclaimer: I have no idea what I am talking about.

I would say LLC. It should require less effort to get started that way, and you can always move over into an S-Corp once you need to.

[–]hot_bearded_hapa 0 points1 point ago

From your description, an LLC is likely your best bet.

Since you will have multiple members, I recommend that you consult an attorney to draft an LLC Agreement. An Agreement will spell out rights and responsibilities of the members, and specify how and when important events (like capital contribution, profit distribution, member buy-outs, and dissolution) will occur. Your investment in a strong Agreement will pay off if/when internal friction between members arises.

Good luck with your venture! Where will your brewery be located?

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