Jerry Weiss, a student at CBU, has developed a new diet drink, WeighBGone

To: Jerry Weiss

From: Business Partner

Thank you for the opportunity to join you in the business venture for WeighBGone. I thank you for the opportunity to build and expand the business in line with your vision.

To begin the venture, I would recommend a limited liability company taxed as an S corporation. Limited liabilities companies are the most popular type of business enterprise due to their limited liability and flexibility. The owners of an L.L.C., known as members, are afforded the same legal protections as a C corporation but without the same formalities. Limited Liability Companies are popular for smaller businesses due to the easy of incorporation. To organize, companies are required to file articles of organization and operating agreements with their specific state of the organization but specific board meetings, separate maintenance of books, and stock records are not required as with a C corporation. Profits and losses of a Limited Liability Company are passed through to the shareholders, through a Schedule K-1, in accordance with their ownership percentage and taxed as on a personal level. As a result, losses can shield various types of personal income. The members have three options for taxation; (1) through a schedule C as a sole proprietorship as a single owner limited liability company, (2) as a Partnership through Form 1065 for companies with more than one owner, or (3) as a corporation with a special election (Subchapter S). As with a historical C corporation, liability is limited for loans and obligations of the business unless personally guaranteed by the member.

The main disadvantage of an L.L.C. is that members cannot be considered an employee for W-2 salary purposes which eliminates benefits afforded to salaried employees. Salaries are withdrawn in the form of distributions. A limited liability company is dissolved upon the death, insanity, bankruptcy, retirement, resignation, or expulsion of any member of the company.

Unlike a C Corporation, S corporations are not separate legal types of business entities and do not pay taxes. An S corporation designation simply refers to how a business chooses to be taxed under the Internal Revenue Code. New companies are afforded 75 days from the date of incorporation to make an S corporation election. The election is done through IRS Form 2553. An S corporation files an informational tax return annually via Form 1120S.

Like a limited liability company, profits and losses of an S corporation are passed through to the shareholders, via a Schedule K-1, in accordance with their ownership percentage and taxed as on a personal level. As a result, losses can shield various types of personal income. As with shareholders of a C corporation, shareholders of an S corporation separate themselves legally and financially from the business itself and provides a strong level of protection for owners from creditors and lawsuits. S corporations elections require an increased level of compliance than simply an L.L.C. but protections are more S corporations are higher than that of a sole proprietorship. S corporations are required to be domestic corporations with no more than 100 shareholders and only one class of stock is allowed, unlike a C corporation; this function will allow shareholders to grow as the business expands. Shareholders are limited to individuals, trusts, and estates. Unlike a limited liability corporation, S corporations are considered shareholders and are afforded the ability to be treated as an employee corporation for salary and benefits purposes. S corporation shares can be bought and sold as that of a traditional C corporation and the company does not dissolve upon the death, insanity, bankruptcy, retirement, resignation, or expulsion of any shareholder of the company.

Respectfully submitted.