What Are the Most Common Types of Business Entities in New York?January 14, 2019
When preparing to launch a business, there’s a myriad of things to do, such as raising money, hiring staff, developing a marketing strategy, as well as highly important business and legal issues to consider. Choosing among the types of business entities is one of them, and it’s a decision that has very real legal and financial implications.
Thorough preparation is crucial for starting a new business – here are the most common types of entities in New York State and what you need to know about them:
A C-Corp is an independent legal entity. The company’s owners (shareholders) have control over the corporation, but one person in a C-Corp can fulfill the roles of a board of directors and officer.
There are many regulations and tax laws that the company must comply with, and it’s advisable to seek legal advice regarding methods for incorporating and required forms.
Pros of a C-Corp include: owners/shareholders don’t have personal liability for the business’s debts and liabilities; more tax deductions than any other type of business; lower self-employment taxes; ability to offer stock options.
Cons of a C-Corp: The company pays taxes on the corporate tax return, and then shareholders pay taxes on dividends on their personal tax returns; owners cannot deduct business losses on their personal tax return; corporation formation and maintenance can be complicated
Owners who invest profits back into the business as opposed to taking dividends are more likely to benefit under a corporate structure.
An S-Corp also has the limited liability, meaning owners (shareholders) don’t have personal liability for the business’s debts and liabilities; profits and losses pass through to the owners’ personal tax returns, and there’s no corporate-level taxation. There’ll be corporate formalities to comply with, such as creating bylaws and holding board and shareholder meetings.
Pros of an S-Corp: It’s a pass-through entity, so no corporate taxation and no double taxation. It can be a good choice for businesses that want a corporate structure but like the tax flexibility of a sole proprietorship or partnership.
Cons of an S-Corporation: may be more expensive to create; requires registration with the state; more limits on issuing stock vs. C-Corps.
Limited Liability Company (LLC)
An LLC takes positive features from each of the other business entity types. It offers limited liability protections – owners don’t have personal liability for the business’s debts or liabilities.
You can choose how you want the IRS to tax your LLC and treat you as a corporation or as a pass-through entity on your taxes.
An LLC also requires registration with the state.
LLCs are popular among small business owners because of the ease of a sole proprietorship or partnership with the legal protections of a corporation; so if you’re a freelancer, this may be the best route to register your business.
Once you are certain which route to take, register your business as a Corporation, Limited Liability Company, or Limited Partnership with New York State. People may spend thousands of dollars and years of effort to develop a business, only to find out that it was not properly registered in the first place – so it’s wise to seek legal and business advice first.
One of the first steps towards assuring you are doing everything to protect your business is choosing a reputable and experienced business law attorney, corporate attorney, or LLC law firm to assist you in the intricate process of starting a business and to see that your legal bases are covered.
Careful planning and legal assistance could help you avoid mistakes leading to catastrophic financial and legal consequences – let our business attorney guide you through the process of selecting and registering a business entity and preparing business agreements between you and your partners.
Our proficient corporate lawyers are well equipped to assist you with business laws and customs and provide support with legal challenges when planning, structuring, and conducting business transactions within a wide range of industries.
Take steps today to set yourself up for greater chance of success in NYC and NY with a peace of mind from day one knowing your rights and interests are protected – contact Levin Law Group today.This entry was posted in Blog. Bookmark the permalink.← Gift Ideas for New HomeownersHow to Prepare for Estate Taxes →