[BrettStapper]

Hi everyone,

I own a website that displays off-campus housing to students. Landlords and property managers create accounts, then list their rentals to students in their selected area.

We are preparing to turn this website profitable but first we need to become a legally registered business. I have one partner and we each "own" 50% of the company but I have heard very bad things about partnerships.

So I am looking to form a corporation, any advice as to which structure would be best? Please explain your answer too.

Thank you!

[pboychuk]

Just a basic partnership would be best, draw up an agreement. No reason to incorporate if you don't plan to go public and don't need a liability shield. Personally, I wouldn't even worry about registering anything unless you start making more than $1k per month.

[BrettStapper]

Right now we allow companies to become members for free but beginning January 1st 2010, we will be charging $25.00 per month. We have spoken to all of our current members and we have come up with that figure after surveys and discussions through the members themselves.

We have about 700 members, assuming that ONLY half remain members after the new charge, we will be looking at almost $9k per month.

We are also preparing to invest $15,000 into the marketing of the site.
All of our marketing so far has been free through email and cold calling. So figuring that since launching just four months ago we have had that many members, once we invest actual money into marketing, we will be expecting many more companies to sign up at a much quicker rate.

With these new numbers, do you still think that a partnership would be our best bet????

Thanks!

[GlobalWealth]

In most cases such as yours, I would recommend an LLC. A partnership opens you up to unlimited risk. A limited partnership may be a bit too complex for what you need. An s-corp or c-corp are likely more complex as well. An LLC offers you the most flexibility and if structured properly, the best tax benefits and asset protection as well. Good luck.

[rdc]

An LLC could be a good bet. It is essentially a partnership with limited liability and various other structural benefits (if planned properly).

What you really need to start thinking about is how you want operation of the business to work: should the two of you have 50/50 say in every decision (voting rights)? When you say "we" are investing $15k, do you mean the both of you evenly? If not, you will run into issues when planning the voting and liquidation rights relative to the investment interests; including tax implications--if one of you invests more than the other yet you have equal interests, one will recognize income for tax purposes. Consult attorneys and tax experts on this if possible.