Considering Alternative Business Forms with Steven D. Goldberg

There are many different business forms. In some types of transactions the course of dealing within the industry shows preference to different forms of business. For instance, if you’re in the oil and gas industry, you will want to be using limited partnerships, as that is they structure their investments. Different industries, bring different issues when doing business, so you will want to chose the best incorporation form that suits how you plan to do business.

Steven D. Goldberg, Esq.
Steven D. Goldbert, PA
PO Box 7605
Wilminton, Deleware 19803

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The jumbo jet and large aircraft industry, prefers a statutory trust. The industry has grown over the years set up that way, so they simply continue. You want to consider what the other options are. In most cases, unless you are in the cruise ship business, or the oil and gas industry, you will probably want to start out with an limited liability company (LLC).

If you want to do an IPO, most underwriters will want you to be a corporation. Fortunately under Delaware law, you can convert between forms of entity. You can start out with an LLC and simply file a conversion and a certificate of incorporation to become a corporation. The date of formation stays as the original date you formed the LLC.

Pros and Cons of an LLC

Tax options
Asset protection
Inexpensive to operate
Single member LLC generally disregarded
Manages can represent constituencies
No one man/one vote requirement

Complexity/cost of operating agreement
Self employment tax for “substantial participation”
Multi-member LLC generally taxed as partnership