Help needed.Compare and contrast your peers response. Would you take the same approach? What about their advice do you find insightful? What would you change?

Question:

Gina Grasscutter has a small lawncare business. Her husband, Hank Hubby, helps her from time to time. Ginas business is growing faster than the lawns she cuts. Gina comes to you, a new lawyer, for advice on how to protect her business.

Using this weeks material, advise Gina on the types of business organizations that might benefit her and why. Also, advise Gina on what, if any, effect HHs marriage to her and his help for her business might have.

Response:

There are a few types of organizations that Gina could form: sole proprietorship, partnership, corporation, or LLC. The most popular option, and one that I would recommend, is to form a limited liability company. This will benefit and protect Gina on many levels. Members or registered agents do not risk any personal liability for debts to the company; they only risk the initial capital that they put into the company. A downside to this is that LLCs sometimes pay more taxes than a corporation would, though a benefit is that an LLC does not need to provide any government filings or have shareholder meetings.

Another option for Gina would be a sole proprietorship or partnership. Both of these offer a flow-through tax structure that would place taxation on the individual's personal income tax. A sole proprietorship would place all liability and responsibility on Gina, whereas a partnership would place liability and responsibility on the agents of the company. Both types of companies would rely on raising capital from banks or lenders; it could be difficult to raise money outside of this.

The final type of company that Gina could form would be a corporation. A corporation can be costly and difficult to set up and operate; government filings and regulated meetings would have to take place between agents and shareholders. Gina would be completely free of personal liability in this organization, and her husband could be a shareholder in the company. If something were to happen to Gina, the company could be transferred to her husband, Hank. Taxes with this type of organization would be filed as a separate entity.