Laws of the jurisdiction in which the business is organized, as well as laws of all jurisdictions in which it will conduct business, govern distillery business formation. As such, the body of law governing distillery business formation is complex and ever changing. The first step in the formation of a business is selecting the business entity with which business will be conducted.
A distillery business must elect whether to conduct business as a sole proprietorship, a partnership (general partnership, limited partnership, limited liability partnership), limited liability company, or a corporation. In selecting the business entity, our Zeller business attorneys will walk our clients through a number of factors, including control, taxation, liability, and raising capital.
Choosing An Entity
The following is a brief review of the four types of business entities distilleries must elect when forming their business.
This type of business entity is for the entrepreneur who conducts business for him or herself. This business entity is not separate from the individual, and as such, besides industry-related licenses and permits, there are no special filings required for a sole proprietor to conduct business. A sole proprietorship is created when the entrepreneur begins conducting business. However, with a sole proprietorship, the business owner is limited by his or her personal capital contributions because this type of entity does not have shareholders or members. A sole proprietorship is the most basic of the four entities. As its name indicates, a sole proprietorship is created when an individual manages the company and is resposnsible for all of the decision making. It is not a separate entity and it has no existence separate and apart from the individual. There are no special filings required before a sole proprietor may begin conducting business (aside from any industry‐required licenses and/or permits). The entrepreneur must merely begin conducting business and a sole proprietorship is formed. A sole proprietorship is not taxed separately from the individual and must claim any profits the company makes during the year in his or her own personal income taxes. A sole proprietorship enables an individual to have complete control of the business and business decisions, and it simple to create; however, it also means an individual’s personal assets are not protected as he or she is personally liable for the business’s debts and obligations.