Decisions related to incorporation can have far-reaching ramifications for your legal liability, tax liabilities, costs, and level of control over your business. A lawyer can help you select an ideal business structure before beginning filings.
An LLC that is legally established can be seen as its legal person, thus protecting any assets it owns from creditors’ seizure.
Sole Proprietorship
A sole proprietorship is the most accessible form of business ownership. All it requires is having one owner; your entity doesn’t even need to be legally registered at state, local, or federal levels! It may already have started operating this way without ever officially registering as such! With such an affordable yet flexible structure at their disposal – ideal for entrepreneurs trying to launch their startup as a side gig outside their primary job roles while using personal finances to get it off the ground – becoming a sole proprietor is also ideal if your resources are limited as this type of ownership allows business start-up via personal finances!
Sole proprietorships present a distinct disadvantage in that you assume liability for losses and debts incurred by your company, unlike other forms of business, which provide legal separation between their owners and themselves, providing some protection from personal liability. Without this shield of legal separation between ownership and liability protection, creditors could seize personal assets such as your home, car and bank accounts in case your business was sued or went bankrupt; insurance may reduce some risks but is never an absolute safeguard.
An additional drawback of being a sole proprietorship is finding loans difficult. Lenders tend to favor supporting incorporated companies as these are held liable by law if debts or liabilities go unpaid.
If you plan to hire employees, an employer identification number (EIN), separate from your Social Security number, is essential for business operations. Furthermore, opening a different bank account for business uses will help to keep funds separate. It’s also wise to obtain a DBA (Doing Business As) for branding purposes and obtain a Tax ID Number so it is easier to file taxes with these expenses.
Converting from a sole proprietorship to an LLC or corporation may not always be straightforward; there may be fees and requirements involved that can prove expensive and time-consuming. As with any significant business change, seeking professional advice before taking action is usually best practice.
Partnership
Partnership businesses involve two or more people sharing ownership and responsibility. Partnerships are more accessible to set up than corporations or LLCs, as they don’t require registration with the state; however, partners remain responsible for any debts incurred by their business and must determine how to address disputes that may arise within it as these can become expensive for everyone involved.
If one partner cannot fulfill their responsibilities to the business, creditors could seize their assets. To prevent this from occurring, partners must draw up a solid partnership agreement containing each of their responsibilities and duties clearly outlined. Our New York business attorneys offer this service to clients.
Considerations should also be given when creating a partnership regarding taxation of its operations. Although the league itself will not pay taxes, any profits and deductions accrue to individual partners who report them as personal income tax returns. Long-term plans for your cooperation should also be made as you would need someone else to step in should someone leave or pass away unexpectedly.
Once partners have settled on how they’ll run their partnership, the next step is naming the company. A name should reflect its type and a combination of its owners’ last names; any existing companies must ensure it doesn’t conflict. Finally, partners must provide no other business already uses that name – otherwise, a different one needs to be chosen, or changes must be made accordingly.
Partners must determine how their partnership will be dissolved if it becomes no longer viable, with an established dissolution plan to prevent messy legal battles between partners as they wind down their business. If no such program exists in their partnership agreement or elsewhere, New York’s partnership laws may dictate how best to handle dissolution proceedings.
Corporation
Establishing a new business can be a complex legal process that involves state, local, and federal laws. A New York business lawyer can help guide you through it all to ensure compliance with all applicable regulations – they can assist in registering your business with appropriate authorities, obtaining necessary licenses and permits, negotiating and drafting contracts as well as offering advice about selecting an entity type that fits with your goals while providing liability protections.
A corporation is a separate legal entity that owns and manages its assets. Its shareholders enjoy limited liability for debts and liabilities of the company, and corporations often benefit from tax breaks that allow deducting certain expenses as tax deductions. Corporations also issue shares to raise capital, which is invaluable for entrepreneurs or venture capitalists and may provide stock options to employees to encourage involvement in the company.
When creating a corporation, the first step should be filing articles of incorporation with your state. These documents outline your company name, purpose, registered agent, initial directors, and other information. After filing the articles of incorporation with your state, an attorney can prepare corporate bylaws that outline how your corporation will run; such provisions might cover how your board of directors, general manager, and shareholders will manage it.
Draft a shareholder agreement that outlines their respective rights and responsibilities as shareholders, and have it signed by all members. A resolution usually follows this step to approve its terms. In addition, you should appoint an agent for service of process who will receive any legal documents or notices on behalf of your corporation.
At Fourton & Associates, PLLC, we understand the unique challenges New York businesses of all sizes face and offer comprehensive legal counsel in every stage of business ventures – from startups to multinational enterprises. Contact us now for a complimentary consultation with an experienced New York business formation lawyer!
Limited Liability Company (LLC)
Limited Liability Companies (LLCs) are hybrid businesses that combine elements from both partnerships and corporations, allowing their owners, known as members, to choose how the business should be run while also offering tax benefits that other structures cannot. Furthermore, LLCs protect individuals against personal liabilities more effectively than sole proprietorships can while being easy to establish and administer.
An experienced lawyer can be invaluable when starting their own business. They can assist with crucial formation documents like an operating agreement and articles of organization, as well as making sure all filings and legal requirements are completed correctly. Furthermore, an attorney can advise entrepreneurs as they select an entity type such as LLC, partnership, or corporation for formation.
Step one in creating an LLC is selecting a name and designating a registered agent who will accept legal papers on behalf of the entity in case it faces litigation. Ideally, this person or business should reside within the state where your LLC will be formed.
After selecting a name for the LLC, the next step should be filing articles of organization with your state. These documents usually contain simple information about the name, address, and owners; they should be filed with either the secretary of state or other similar office (in some states, these may also be known as certificates of formation).
Many states require an LLC to publish a notice of intent to form the entity in a local newspaper to inform the public of its establishment. After filing its articles of incorporation, an LLC must secure any necessary licenses or permits depending on the state and industry.
Selecting an entity for your business is crucial as it will affect its management, your liability for debts incurred through it, and taxes payable. Hiring an experienced attorney to assist can assist in selecting one that meets all your goals while best protecting personal assets.
