In today's global corporate environment characterized by complexity, increasingly stringent regulations, and continuing technological innovation, having the right legal counsel is essential for a business to remain in compliance and succeed. New York businesses in particular need to be knowledgeable of the laws and regulations affecting their operations in the state. To clarify what's required of a business from a legal perspective, this article provides answers to frequently asked questions (FAQs) regarding corporations in New York.

FAQs related to the formation of a corporation in New York, differences between an LLC and corporation, requirements for filing taxes, and other issues will be explained below. It is important to note that not all the answers are the same for every business and that there may be other potential solutions to the issues discussed. It is always suggested to consult with an experienced New York business attorney for personalized guidance.

What is a Corporation?

A corporation is a legal business structure used to separate a business from its owners and owners from each other. This structure provides limited liability protection, as the owners (shareholders) of the business are generally not accountable for its debts and liabilities. Corporations can be either for-profit (C Corporations) or non-profit (S Corporations).

How Do I Form a Corporation in New York?

The process for forming a C Corporation in New York involves a number of steps. First, the incorporator must select a fictitious name for the corporation and file articles of incorporation with the Department of State. Then, the incorporator must open a bank account in the name of the corporation, and file additional paperwork with the Division of Corporations (the Certificate of Disclosure and the Certificate of Compliance). Furthermore, the incorporator should draft organizational documents such as bylaws and resolutions that will govern the operation of the corporation. The incorporator must also appoint initial directors and officers, and, finally, apply for a federal employer identification number.

What are the Differences Between an LLC and Corporation?

The main difference between a corporation (C or S) and a limited liability company (LLC) is the tax treatment of the structure. Specifically, corporations are subject to double taxation (meaning income is taxed to the corporation and shareholders are taxed on the dividends they receive from the corporation). LLCs, on the other hand, are generally able to pass-through their income to owners who are then taxed on their personal tax returns at their individual tax rates. Additionally, corporations are subject to more formalities such as the requirement to have annual shareholder meetings and recordkeeping requirements.

What are the Requirements for Filing Taxes in New York?

New York-based corporations must file the Department of Taxation and Finance's Corporate Tax Return and other applicable forms according to their filing frequency. Generally, “domestic” corporations (corporations headquartered in New York) are subject to New York state tax on their entire business income — regardless of where they do business — while foreign corporations only need to pay tax on income generated by activities conducted within the state. Furthermore, current state taxes corporations pay in New York include the Corporate Franchise Tax and the Metropolitan Commuter Transportation Mobility Tax.

What Are the Liability and Compliance Management Responsibilities of a Corporation?

Corporations are subject to a variety of federal, state, and local laws and regulations. Therefore, corporations should develop and implement compliance management systems that are regularly updated to address changing legal requirements. Additionally, effective management of the corporation also helps to protect its owners from liability for the business' conduct. This includes maintaining records including minute books, implementing internal policies, recording timely corporate resolutions, monitoring employee activities as well as inter-company and external transactions, and taking advantage of contractual protections.

Concluding Thoughts

Above are some of the most common questions regarding corporations in New York. The world of business and corporate law can be complex. Hiring experienced New York business attorneys to provide counsel on these issues is the best way for a business to stay compliant and succeed.

UpCounsel is here to help businesses of all sizes find attorneys who specialize in the laws and regulations of New York State. No matter the complexity of the issue, we have a vetted network of experienced legal professionals to provide personalized consultation and high quality legal services.


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