Getting Started with Incorporation: A Guide to the Process in New York
The Advantages of Incorporating Your Business: Limited Liability, Stocks, and Credibility3 min read
Incorporating your business has many advantages: it benefits fromLimited liability, creates a framework for issuing stocks to investors, andhas more credibility with banks and potential partners. Incorporationcan seem like a huge step, but it doesn’t have to be daunting. Here isa guide to the incorporation process for business owners in New York.
What Are the Benefits of Forming a Corporation or LLC?
Individuals who want to operate as a business, either in New York oracross state lines, should consider incorporating. This can provide varyingdegrees of protection from personal liability, dependant on the type ofcorporation or LLC you choose. Both the Limited Liability Company (LLC)and the Corporation (Inc.) have abilities to establish their own tax rate.They also permit shares and stock trading, creating a framework forinvestors who want to contribute capital.
In addition, incorporating your business can gain it greater credibilitywith other businesses and financial institutions. Your bank may give you ahigher line of credit or more lax terms when it knows your business isincorporated.
Forming a Business Entity in New York
New York business law permits you to choose either a Corporation(Inc.) or a Limited Liability Company (LLC) as your businessentity. Depending on how you will use the business my decide which optionis best for your circumstances. Each option provides different types ofprotection, advantages, and disadvantages.
The first step to incorporate your business is to choose a business name.If the name is already in use, you may need to choose another. Once youhave chosen your name, you will need to “reserve” it with the NewYork Department of State. Reserving a name is done by filing the Applicationfor Authority and Designation of Office.
The next step is to create an Operating Agreement for an LLC or By-Laws for an Inc. These documents define the structure of the corporation or LLCand provide formal rules and regulations for how the entity will be governed.
Once these documents are ready, you can file the Articles of Incorporationor the Articles of Organization for an LLC. This is the official paperworkused to form the business entity, and it will need to be filed with the NewYork Department of State. This filing fee is currently $75 for domesticLLCs and $250 for domestic corporations. A foreign LLC or corporation, one
that has not been formed in New York, will need to file an application forforeign qualification.
After the Articles of Incorporation or the Articles of Organization arefiled and approved, you may wish to apply for an Employer IdentificationNumber from the Internal Revenue Service. This number is used when filingtaxes or applying for loans, and is required for every business.
Once all is said and done, you will need to obtain business licenses andpermits. This may include zoning permits, operating licenses, and tax permits.Contact your local government about any local requirements.
Frequently Asked Questions About Incorporation
Q: What are the fees for registering a business in New York?
A: The fee for filing the Articles of Incorporation or the Articles ofOrganization is currently $75 for domestic LLCs and $250 for domesticcorporations. A foreign LLC or corporation, one that has not been formed inNew York, will need to file an application for foreign qualification.
Q: How do I reserve a name in New York?
A: Reserving a name can be done by filing the Application for Authority andDesignation of Office with the New York Department of State.
Q: Do I need an Employer Identification Number for my business?
A: If you have employees working for your entity, then you will need toobtain an Employer Identification Number from the Internal Revenue Service.
Q: Do I need to obtain business licenses and permits?
A: Yes, depending on what type of business you are running, you may need toobtain business licenses and permits from your local government.
Last reflections
Incorporating your business in New York can have many advantages andprovide several kinds of protection. The process of incorporating requiresseveral steps, from creating formal documents to filing paperwork with theDepartment of State. Additionally, you may need an Employer IdentificationNumber and various business licenses and permits.
Seeking counsel from attorneys that understand local regulations andlaws is your best bet for a seamless incorporation process. Through access to high quality attorneys on demand, UpCounsel provides business attorneys with an average of 14 years of experience and with client ratings and reviews of recent work.
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