Is LLC the best type of entity?

[davdear]

I am going to open (hopefully) a small craft distillery in the Northeast Tri-State area with a friend and we want to form an entity. Our space is small (900 sq ft) and it will just be the 2 of us for at least the next year- no other investors. We have a distillery name and our first thought was to form an LLC. It seems like many small businesses use the LLC, but I did hear a lawyer say the federal government does not like LLCs as much as other types of entities, like a C Corp. Unfortunately I heard this in passing and don't know the reasons why. Is an LLC good way to set it up? Has anyone experienced any problems related to the type of entity you create?

Thanks!

[Foreshot]

Ask a lawyer and an accountant. The biz structure is mostly about protecting assets and limiting tax burdens. For you situation it will most likely be a LLC. The fed doesn't treat different biz structures differently other than to make sure they know who owes taxes and how much. The vast majority of new small businesses today are LLCs. Each state treats LLC a little differently. That's why you need to ask a local lawyer/accountant.

https://en.wikipedia.org/wiki/Limited_liability_company

In essence if you're going to have fewer than 100 or so significant investors you'll end up being a LLC.

[Pour Decisions]

Definitely speak with whomever your legal consultant is, but my input is that if you are starting a business with a friend, you would be a multiple member LLC. For ease of tax reporting etc, I'd ask your CPA if it makes sense to setup as an S Corp, which it likely does. 

[davdear]

Thanks folks, for the helpful advice. I don't see a downside to an LLC and like you said you can have S-Corp taxation. This is the part where I get a little unsure so I will listen to your other advice and talk to my CPA

[dhdunbar]

All of the above advice holds.  LLC's are by far the most common form of organization.

From TTB's standpoint, the only difference in qualification is the persons who must be included in the information submitted with the application. 

For an LLC applicant, the information must include the names of the 10 persons who hold the greatest interest in all classes of membership.  If you understand classes of membership, you know what that means.  If you do not understand it, you have no need to understand it. 

For a corporation, on the other hand, you must list all officers and directors, but you need list only the persons who hold 10% or more of the outstanding voting stock if they are not officers and directors.  

If you must list a person as a member of an LLC or as an officer, director, or stockholder of more than 10% of the outstanding voting stock in a corporation, that person must complete a minimally invasive personnel questionnaire -it does include a question about arrests and convictions and where there was either, the person must disclose the details - and you must state the amount of the investment and the source from which the funds were derived.  TTB is no longer requiring documents that show the source.  The simple statement suffices.   They could  begin asking for documents again in the future, but I doubt they will.