Shrapnel wrote:Here in the States, at least at the time of the book I did look at, a sole-owner LLC was iffy as far if a state would register and recognize it... and even less than that if another state would recognize it. So you'd almost have to have at least a partnership to even consider one that would be recognizable in all states.
Um, no. If a state doesn't have a Limited Liability Corporation (LLC) defined in its statutes then you simply can't set one up in that state. There's nothing "iffy" about it. If an entity can't be filed with the state under its statutes then you don't have any associated liability shield.
Businesses are most often structured as one of the following. There are surely other choices in many states but these will cover most of what you'd consider when setting up a small business.
Sole Proprietorship
Partnership
Corporation (Chapter C or Chapter S)
LLC - Limited Liability Corporation
LLP - Limited Liability Partnership
PC - Professional Corporation
Let's assume that the goal is to sell products while limiting your exposure to claims of liability. The Sole Proprietorship and ordinary Partnership won't do it at all. Your liability exposure when operating as either of these is unlimited. i.e. They can take away your possessions and probably even your birthday. You don't even have to file with the state. If you operate as a one man business you are, by definition, a Sole Proprietor. Likewise, if two or more people operate a business you are, by definition, a Partnership and Partnership law will apply. The only gray area is the point at which you graduate from an individual selling the occasional amp to a businessman who sells amps for profit.
For liability shielding, incorporation is the best bet. There are three broadly recognized types of corporations, the C-Corp, the S-Corp and the Professional Corporation. A corporation is simply an artificial person. A C-Corp pays tax just as if it was a person so anything you, as an investor or owner take out of it has already been taxed and when you take a profit or a dividend you will also pay tax as an individual. Double taxation. An S-Corp also limits liability and is constrained in a number of ways including the number of shareholders. Its main advantage is that S-Corps are not taxed at the Federal level but they may be taxed by the state (CA does, for example). Your accountant generates a K1 from your business books and that goes into your personal tax return.
The Limited Liability Corporation (LLC) works much like an S-Corp but has some fine distinctions. The Limited Liability Partnership (LLP) I'm unfamiliar with so I don't know what it could do for amp builders. The PC is only for licensed professionals like MDs and CPAs.
Bottom line: it's a hassle and a half so don't even bother unless you're serious about going into business. If you do, I recommend retaining a lawyer to handle it for you. Legal liabiliity stuff is definitely not DIY.
KennyO