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2/24/04
www.= cmprlaw.com
1
Choice of Legal Entity for a Wine Business=
lSonoma State University – Wine Entrepreneurship
lFebruary 24, 2004
l
lJay M. Behmke
lCarle, Mackie, Power & Ross LLP
l100 B Street, Suite 400
lSanta Rosa, CA 94101
lTel. 707-526-4200
ljmbehmke@cmprlaw.com
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2/24/04
www.= cmprlaw.com
2
Carle, Mackie, Power & Ross LLP
lWin= e and Food Practice
–Formation
–Investments
–Loans
–Real Estate Purchases
–Land Use and Permits
–Vineyard Leases
–Grape Contracts
–Acquisitions
–Licensing and Compliance
–Trademarks
–
–&= #13;
lAtt= orneys
–Bill Carle
–John Mackie
–Simon Inman
–Phillip Kalsched
–Jay Behmke
l&= #13;
&nb= sp;Represent every level of the supply chain:
Wineri= es
Grower= s
Distri= butors
Retail= ers
Lender= s
Invest= ors
Attorn= ey since 1983
Attorn= ey in Wine and Grape Industry since 1992
CFO, B= elvedere Winery (350,000 cases) and
Hambre= cht Vineyards (500 acres) 1988-1992
Two im= portant achievements
   Sunridge Nurseries, ENTAV = clones
   CAWG, Chardonnay with natu= ral flavors
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2/24/04
www.= cmprlaw.com
3
Overview
lBasic types of legal entities – history and purpose
lStructure
–Partnership
–Corporation
–Limited liability company
lTax treatment
lReal world examples
l
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2/24/04
www.= cmprlaw.com
4
Two Basic Structures
lPartnership
–Agreement among partne= rs.
–Not a separate legal = entity.
–Temporary - Lasts only as = long as partners agree.
–Created under common law.
–Partners pay taxes on = their share of profits.
lCorporation
–Structure set by corporate <= /span>law.
–Separate legal existence.= 3;
–Perpetual - changes in shareholders has no effect
–Created by corporate = statute. Each state has their own version.
–Corporation pays its own taxes.
Many v= ariations within these two structures
LLC pr= ovides an interesting mix of two
IRS on= ly recognizes two structures for tax purposes – either entity pays taxes or its owners pay taxes
So for= tax purposes, only two choices – partnership tax treatment or corporate tax treat= ment
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2/24/04
www.= cmprlaw.com
5
The Key Innovation
Corporation
Partners
Liability
Shareholders
Partners
Ownership
Directors/Officers
Partners
Management
Corporation
Partnership
Partne= rship is still a good structure when the business or service adheres in individuals
Law, a= ccounting, doctors
The pe= rson performing the service is the manager of the business, and is liable personally for any mistakes.

Corpor= ation split up ownership, liability and management.
Britis= h East India Company was considered the first, chartered directly by the king.<= br>
In US,= key step was taken – didn’t special legislation.
Set up= system for people to self-incorporate.
Develo= ped in law between 1830-1850
Create= d the legal structure necessary for large scale business to exist
Withou= t it, owners had to be liable and managers.
With c= orporation, possible to have lots of shareholders, raise lots of money, manage it centrally, and have no one person liable for the debts of the entity.
The ba= sic tool of the capitalist society we live in today.
As fun= damental to industrial revolution as the assembly line – maybe more so.<= br>
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2/24/04
www.= cmprlaw.com
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General Partnership