When starting a business in New York, the type of business structure that you organize your business under can have a major impact on taxes, liability, structure, costs and other important forces. There are a few key types to understand and choose from.
Unincorportated business types
There are two main types of businesses that are not corporations: sole proprietorships and partnerships. In both cases, the company is owned directly by one or more people. They hold personal liability for the business; if the company gets into a lot of debt, for example, creditors can go after the owners’ personal assets to satisfy these debts. This structure type is common for simple small businesses like stores as well as tightly held organizations like law offices and doctors’ practices.
Likewise, there are two types of corporations to choose from when forming a business. The S-corporation is ideal for small businesses. It provides a liability shield, so the owner or owners’ personal assets are safe if the company is in trouble. An S-corp does have more paperwork and filing fees to create compared to an unincorporated business, and income from these companies may be taxed differently. A C-corporation is a structure for large companies. It requires a large, complex set of documents, a lawyer and accountant, and other requirements, but is easier to expand and can support a more complex set of financial and legal divisions.
The size of the business, how many people will own it and how it plans to operate all affect which business structure is the right fit and will provide the best balance of convenience and personal protection.