Start a Business – Business Entity Formation
Contact Sachs Law and speak with a business lawyer today to startup your startup! Are you thinking of starting a business in NYC or surrounding areas? When it comes to starting a business and giving your business its best shot, you need to understand the different forms a business can take, and make an informed decision about which to create. This is where our small business lawyers step in. We’re able to discuss the differences in incorporating your business or forming an LLC and create a solid plan for you to start your business right. A customized solution is created for your exact business’ goals and structure. No two businesses are exactly the same and your legal plan should reflect that and not take a cookie cutter approach.
Some of the possibilities for the structure of your business include:
If you are starting your business on your own, a sole proprietorship is one of the most common and easiest methods to form your business under. However, a sole proprietorship does come with many potential pitfalls if you aren’t prepared. Unlike other business formations, a sole proprietorship leaves you alone, responsible for every aspect of the business. If you are faced with a lawsuit, your personal assets become involved, meaning that you risk everything with no protection. Due to the personal risk involved in these ventures, it is typically recommended to only enter this formation if your business is at low risk and does not deal with potential hazards or legal pitfalls. It is typically recommended, that sole proprietorships invest in quality insurance to cover their increased risk.
Made up of a collection of shareholders who elect a board of directors, a corporation provides protection for these members as long as they uphold certain formalities. Starting the business as a corporation will usually pass liability onto the corporation itself. The key to understanding how it is run is knowing that the corporation is an entity on its own. The corporation is liable for debts, and this liability does not extend to its shareholders in most cases. Shareholders of a corporation can sometimes make an S election with the IRS to gain more favorable tax treatment and better protection from personal liability than forming an LLC. However, forming a corporation is not a solution for all businesses, since it does require quite a bit of ongoing housekeeping and potential increase in taxes.
Limited Liability Company (LLC)
Depending on your industry an LLC may be the solution for you. More flexible than a corporation, LLC’s take many of the burdens of sole proprietorship off of the owners and come with some other extra perks. Unfortunately, they often come with more personal tax liability and they can be a bit trickier to successfully set up, as the laws vary greatly by state.
Similar to a sole proprietorship, a general partnership does not require any written forms or documentation, however many do because it is always a good idea to have a written agreement when two or more parties are involved. This lack of formal documentation also means that personal assets are on the line should anything happen to the business. It can also be common for one partner to make purchases or investments in the other partner’s name, meaning that responsibility for the debt would fall directly to him without his direct permission.
Limited Liability Partnership (LLP)
A partnership, this form of business consists of two people, one who assumes personal responsibility and at least one other who is limited. This limited partner is not personally responsible for debts, but also forfeits rights to run the business or be involved in daily management. In this form, you must file documentation with the secretary of state.
Professional Corporations and PLLCs
Under state law some licensed professionals may only be practiced within a professional business entity. These are similar to their non-professional counterparts but may require additional approval from state agencies.
Not For Profit and Benefit Corporations
These organizations typically are created to serve a charitable purpose or to benefit a charity. Once the not-for-profit corporation is formed, Sachs Law is able to help you qualify for 501(c)(3) status with the Internal Revenue Service and register your organization to solicit donations in New York State.
Contact our business attorneys at Sachs Law for all of your business formation needs and get the answers you want to start a business today! Flat fee packages are available that include all necessary steps when starting a business in New York City.
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