September 21st, 2018 • by Bob English
Bob English

Bob English

Bob is a Partner in the Trademark Group at Cowan, Liebowitz & Latman, P.C., a leading intellectual property law and litigation firm based in New York City for over 60 years specializing in protecting and enforcing rights under trademark, copyright and patent law. Bob is a life-long craft beer enthusiast and industry supporter who knows the legal issues faced by craft breweries and businesses servicing the craft brewing industry. He has extensive experience with domestic and international trademark prosecution and enforcement matters, and regularly advises start-up craft breweries and other beverage, food and hospitality brands, both small and large.

What type of entity should you and your partner(s) use for your start-up brewery: a partnership, corporation or limited liability company (LLC)?  Here are some general considerations to tailor to your own circumstances.

Entity.  A partnership is usually not an option as it would not limit your personal exposure to creditors and claims. An LLC is preferable to a corporation as it has a less rigid ownership and management structure.

Organizational Considerations.  To form your business, you will need to determine:

  • The state of organization: for start-ups it is better to file in the state where your business is located;
  • Business name (and assumed name): names must be cleared for trademark conflicts as well as for company name conflicts;
  • Ownership interests: How will shares or ownership interests be allocated among the partners?  Will there be voting classes or other restrictions?
  • Capital contributions: how much will each partner contribute (cash, property or services) and will some money be in the form of loans (debt).

Governance. A corporation has shareholders, directors and officers. An LLC is less formal, being managed by its members or a manager (who can be a member as well). If there is more than one shareholder or owner, you will want an agreement covering such things as management, restrictions on ownership transfers, buy-out arrangements, and possible employment agreements.


  • Corporation. A corporation is formed by filing a certificate of corporation with the Secretary of State of the selected state. The shareholders elect a board of directors and adopt by-laws, and the directors elect officers. The Secretary issues share certificates and arranges for periodic shareholder and director meetings.
  • Limited Liability Company. An LLC is formed by filing articles of association with the Secretary of State of the selected state. The members adopt an operating agreement which covers topics similar to bylaws and shareholder agreements. Formal meetings of members and issuance of ownership certificates are not required.

Taxes. The tax laws are complicated, and the new Federal tax law has made entity selection decisions even harder. Consult a tax lawyer or accountant. Whether you use a corporation or an LLC, it should have its own federal tax identification number (not needed for a single member LLC without employees), accounting records, bank account and appropriate insurance. The tax rate for regular corporations (“C” corp.) was reduced to 21%; however, it may still be beneficial to use a “pass through entity,” either an “S” corp. or an LLC. The owners may be eligible to deduct 20% of their pass-through income. These tax considerations may be affected by various issues such as how much income the entity makes, and how much money must be retained in the business for capital equipment and other purposes. State and local tax and reporting requirements also must be considered.

Final Piece of Advice. Make sure to keep proper company records, and keep your personal and company funds separate. If you fail to do so, creditors may be able to come after you personally.
It also is desirable to look into product liability insurance coverage because you can save significant legal fee costs if the insurance company defends a claim against your company.