After choosing a name for your new business, you must choose the structure under which you wish to operate. If you work alone and plan to mingle your profits with your personal assets, a sole proprietorship may be the simplest option. You could also form a partnership, limited partnership, limited liability company, or corporation.
The structure you choose should fit your unique goals. Before making this choice on your own, speak with a New York business formation lawyer. At Sparks Law, a knowledgeable attorney could explain the benefits and drawbacks of each entity and help determine which is best for your circumstances.
New York does not impose filing requirements on sole proprietorships, other than registering trade names if they differ from the owner’s name. This means a local entrepreneur can launch a business immediately after securing local permits and licenses. Any income or losses are filed on the owner’s personal income tax forms.
However, owners are responsible for the business’s debts, lawsuits, and contracts. If owners pay any wages to others, a New York business formation attorney could help them apply for an Employer Identification Number (EIN) from the Internal Revenue Service.
Two or more persons who agree on a business strategy might find a partnership is a suitable structure for their small business. Partnerships in New York can be limited, which means some owners who contribute capital may not have any say in running the business. Owners still incur licensing and permitting obligations and must register a trade name. Because more than one person owns the company, a skilled business attorney should help draft a partnership agreement to ensure owners understand their duties and how profit will be distributed.
Many duties attach to corporations, such as yearly filings, specific tax reports, and transparency to shareholders entitled to inspect the books and records. Corporations are the only entities structured to trade on a public stock exchange, so the corporate world needs to make sure that investment is safe through enhanced filings and transparency.
Corporations raise money more easily than any other entity. Investors can purchase stock for an ownership in the company, and as the company grows, the investment becomes more valuable. Banks are more inclined to lend money to corporations because they can attach their assets through a Uniform Commercial Code filing.
An experienced local attorney could help founding shareholders complete the following steps for forming a corporation:
At Sparks Law, our knowledgeable business formation lawyers could ensure a client who chooses a corporation as a suitable entity is making the right choice.
Many U.S. business owners choose limited liability companies (LLCs) as their structure because this option is flexible and protects owners if the company is sued or incurs debt. LLC owners, called members, can weigh whether a corporate tax structure benefits them and can choose it over the default pass-through structure, where LLC profits and losses are allocated to members to report on their personal taxes. An LLC formation lawyer at our firm could advise a client about tax issues in New York.
LLC members allocate percentages of ownership in the company based on their initial capital contributions, money, property, or services. Members should work with a business formation lawyer at our New York office on their operating agreement. This document governs the LLC and explains how much of the company each member owes, how profits will be allocated, how new members can buy in, the preferred tax structure, and how the company will be dissolved.
If you are starting a company, it is crucial to consult a legal advisor when deciding what business structure is right for you. At Sparks Law, our New York business formation lawyers can explain each entity and help you choose the most beneficial vehicle for your specific needs and goals. For dedicated advise as you build and grow your company, call us today and set up a consultation.