What type of Business to Form

I bake cookies and other treats as a hobby. I want to start selling these items to shops etc. I know it is important to have a business entity but am not sure if I sure do a FBN or corp or what. Suggestions would be great. Thanks.

Dear lisandraz,

Are you the only one involved with the business? If yes, then a partnership would be out. You can either set up a sole-proprietor or a corp.

The pros and cons of each are as follows:

Sole-proprietor - you are the owner, you get the profits, but you will be held personally liable if you owe money. this business type is also cost effective to set up and quite easy.

Corporation - a corp is its own entity. Filing is more difficult and costly and you may need an attorney. Corporate officers are generally not liable for debts of corp.

I hope this helps and good luck with your business.

I have mortgages on 2 investment properties. If I form an LLC, can I transfer ownership of the properties and loan responsibility to the LLC?

You can, but I would first check w/ your lender. Often, loan documents will have clauses which will cause the mortgage to be paid in full upon a transfer. I would imagine that getting your lenders approval shouldn't be a problem in this case.

I would definitely concur with the suggestion to contact your lender first. Standard Fannie/Freddie mortgages do have transfer clauses within the language and the lender could technically have the right to call the loan due. Certain states have their own secondary requirements/restrictions as well. Just an FYI ..in the past week to 10 days, lenders across the country are scrutinizing all mortgage transactions with a microscope .. be prepared for your current lender to either flatly turn down your request or put you through quite a bit in order to transfer ownership. (Despite all that, it's always worth a try.)

Good luck.

First, a single person CAN have an LLC to protect themselves from lawsuits, especially nice when you produce a product that COULD be grounds for a lawsuit. Secondly, if you are going to have real estate involved, consider a serial LLC owned as a subsidiary of your LLC for the company where each building would be a separate LLC in the serial. Don't tie up your business in the serial since your business has totally different operating needs. Thirdly, create an operating agreement for yourself so you KNOW how things should be done if you ever get a partner or an operator who manages it for you or perhaps even multiple locations or franchises. Use the State Statutes standard agreement and rewrite those areas that do NOT operate as you would want them to. Make it specific to your own needs and wants. Don't get into too much detail on how you are going to operate... just stick to the basic outline in the statutes but make it YOURS. Take it to a lawyer and have him vouch that it is legal. Then put it in a book with your company papers to serve as your company BIBLE. Good Luck.