I am starting a business in NC ( LLC or s-corp) not sure which would be best. I want to initially form this myself, then allow another member….

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I am starting a business in NC ( LLC or s-corp) not sure which would be best. I want to initially form this myself, then allow another member….

I am starting a business in NC ( LLC or s-corp) not sure which would be best. I want to initially form this myself, then allow another member in order to get capital. I am wondering how to handle this. For example, all the work and running and decisions need to be handled by me. I will form the entity, and open a banking account with say $200. Then if I have an interested party that wants to invest $15,000, how should I handle this? I would possibly give them 25% of the entity and I keep 75%. This is vastly different from the amount of capital contributed by each. So which form should I choose, and how should I structure the deal? Also I have my own web design business, and will be handling the new business’s web needs can my company invoice the new company, or is this a conflict of interest, since I am a part of both companies?

Asked on May 28, 2009 under Business Law, North Carolina

Answers:

J.M.A., Member in Good Standing of the Connecticut Bar / FreeAdvice Contributing Attorney

Answered 11 years ago | Contributor

Based on what you are telling me, you want to set up a LLC.  You want to have have control of all decision making and need to implement an operating agreement that provides that you have the ultimate say.  That way all business decisions are made by you, plus you will have certain tax advantages that your CPA can explain to you by having an LLC.  Therefore, you should set up the LLC.  There is no conflict of interest with having your web design business service the new company as LLC's/corporations have separate legal capacity.  I suggest that you make sure that you document all transactions and have records to support payment from the new company to the web design company so your partner/other member doesnt accuse you of stealing money.  You should make an appointment with your CPA to discuss the tax advantages and set up the LLC and then see a lawyer to draft an operating agreement to govern the LLC.


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