Over the past few years, the craft beer industry has grown exponentially, so it’s no surprise that more and more people are choosing to invest in the business of beer. However, taking the step to create your own craft beer business can seem intimidating. Other than knowing the type of beer you are going to brew and the grains you will be using, you need to know what business structure your brewery will have. You can structure your business in any one of the following ways:
- Sole Proprietorship: This is a business owned and run by an individual or a single entity. Under the IRS, the owner and business are regarded as the same, so all taxes are reported on the business owner’s personal tax return. As a sole proprietor, you will be responsible for all profits and debts of your business.
Pros: Easier tax setup, easy to get started, less paperwork and fewer business fees, simplified business ownership.
Cons: No liability protection, challenging to get financing, difficult to sell your business.
- Partnership: A partnership is a type of business where an arrangement between two or multiple individuals is made to operate and manage a business. In a partnership business, partners have the same powers, and they share profits and liabilities equally..
Pros: Access to more capital, limited external regulation, provides a greater borrowing capacity, tax benefits, and you can easily change your legal structure later according to circumstances.
Cons: There is an increased risk of disputes; the liability of the partnership extends to the partners personally, meaning that partners can become personally liable for liabilities of the Partnership; in case of dissolution, you will have to value every partnership asset, and this is expensive.
There are different types of partnerships that can provide even better benefits to the partners such as reducing liability to each individual partner.
- Corporation: A corporate structure is a registered business owned by individuals or entities known as shareholders or stockholders. The owners of a corporation appoint a board of directors and/or officers to oversee and govern the business’ activities. Corporations face double taxation, imposed on the owners themselves and on the corporation itself.
Pros: Personal liability protection and business security.
Cons: Subject to double taxation, strict protocols to follow, and can be time-consuming.
- Limited Liability Company (LLC): A Limited Liability Company is a business owned by either an individual or an entity . The owners of an LLC are known as members and are responsible for the business’s losses and profits. Furthermore, all losses and profits are passed on to the members on their own tax returns (this is known as pass-through taxation).
Pros: Pass-through taxation, limited liability, and fewer formalities and protocols than corporations.
Cons: Transferable restrictions and complicated record keeping for assets owned by LLC.
Get Help From a North Carolina Brewery Law Firm
At Rountree Losee, our experienced attorneys will help with all your brewery business formation needs, assist you in submitting the relevant paperwork to the Secretary of State, and navigating the complex federal and state regulations.
Contact us at 910-763-3404 to discuss your business needs with our experienced attorneys