Business Structure

After getting the idea to start a brewery (and then talking about it for a long time), setting up an actual business structure was our first step and the first thing that made our dream seem a little more real.

The main reasons for creating a separate business entity are: tax liability (separate from your own) and legal liability (a layer of protection for your personal assets).  Pretty basic, but there are many forms of business structures, and each one has different levels of those protections (plus some others, in some cases).

We decided to go with an LLC structure for various reasons, but as I said, there are several to chose from.  There are many books on the topic of business structures and the pros & cons of each.  We used these books to help us make our decision:

The Small Business Start-Up Kit for California, by Peri H. Pakroo, J.D. (Nolo Press)

Nolo’s Quick LLC, by Anthony Mancuso (Nolo Press)

Also, the website for the Secretary of State of California was very helpful, and has links to the various forms & applications you’ll need to file.

Once you register your business entity with the City and the State, you’ll have to start paying some sort of annual fee (state & city taxes or a city business license fee).  If you’re a new business and not making any money though, some of those fees can be either reduced or waived.

This process isn’t too hard or complicated, but we ended up using a service to file our application and take care of all the paperwork.  We had to pay a small fee, but the service company took care of everything for us, and even gave us an official company binder, with a generic operating agreement, company certificates, and a nifty embossing tool with our “official” company seal.  We used Legal Zoom, but there are lots of other companies that offer these services, such as We the People, and The Company Corporation.

After getting our business structure setup, and obtaining a federal tax ID number, we were able to open a bank account in the business name, and start conducting business as an actual company.  The nice thing about doing this is that when you start doing business as a company, you start to build credit for your business (with your business tax ID number) – just like you do for your personal credit.  When your company has a good credit history, it is MUCH easier to get loans, leases, and lines of credit.  This will make your life MUCH easier when it comes time to get funding for your company!

6 thoughts on “Business Structure

  1. I suggest checking out the American Bar Association Guide for Small Business Owners. I have been working on the second edition, which is coming out later this year, and there is a ton of valuable information for this type of project.

  2. just wondering if you guys secured a location before setting up your business structure, and how that process went? thanks for all the info on your startup it is very helpful. cheers

  3. My question is the same as Scott’s. In most cases I am noticing the business FBN, Tax ID, LLC are attached to a location. Can you become a corporation without a location? If so, how did you go about this?

  4. I am opening a microbrewery in Federalsburg, MD. As I worked on my business plan, I came across a Brewer’s Association document comparing the number of breweries in 1887 with the number of breweries currently operating. It appears that there is plenty of room for growth. If we simply return to the number of breweries per capita that were in place in 1887, there should be at least 10,000 more breweries today. Very exciting – the bottom line is that there are enough customers if we all agree to share and not aspire to crush our competition. http://www.fedbrew.com

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