Forming a new business in New York requires a lot of prior knowledge. One of the first things you will need to know is what kind of entity you wish to form. There are a number of possible choices. Each comes with its own set of unique pros and cons. The choice you make should best fit the needs of your business.
Sole Proprietorship
The initial stage of business formation and planning should begin with your choice of structure. The simplest one you can go for will be a sole proprietorship. The major pro is that every decision and every profit stays with you. The con is that you can’t legally or financially separate from your business.
Partnership
A partnership is a business owned by two or more individuals. The owners share all of the decisions as well as the profits. A partnership is very easy to set up. It’s also much easier to use as the basis for a business loan. The major con is that disputes can arise very easily if they are not first covered in writing.
Limited liability company
The main advantage of an LLC is that it limits your personal liability while still the tax benefits of a business. This is a type of pass-through entity. This means that the profits and expenses are allowed to pass through to the owners in the form of income on their personal tax returns. Many global companies are LLCs.
Corporation
Corporations can take a number of forms, including S-corp, C-corp, B-corp, closed corp, and many others. The biggest advantage is that a corporation is legally separate from its owners. A corporation has the ability to sue and be sued. It can sell the right of ownership in the form of stocks.
Your choice of business structure can have significant repercussions, so it is wise to research your options. Your research should include a consideration of liability, tax benefits and the relationship between you and any of your investors or partners.
