No One Size Fits All: Sole Proprietorship or LLC?
Ice Miller can help innovators overcome critical challenges to grow successful agribusinesses. Learn more about the unique business and legal challenges facing food and agricultural innovators and how to protect and grow that innovation in our 2015 Agribusiness Guide. An excerpt follows:
Today, if a business will not be operated as a sole proprietorship, it will likely be organized as an LLC. However, there is no “one size fits all” solution and despite their flexibility and popularity, LLCs are not always the best fit for an entrepreneur’s needs or tax situation. For example, LLCs cannot deduct fringe benefits and the members are subject to higher FICA and Medicare taxes. The members must also pay taxes on the LLC’s income regardless of whether cash is actually distributed to them. Other issues that entrepreneurs should consider include industry norms and expectations, regulatory considerations applicable to the specific agricultural business, as well as the management and equity structure, ease of equity transferability, desired transfer restrictions, means for dispute resolution and cost of dissolution. The ultimate selection of a business structure depends on the business owner’s plans and expectations.