Starting a business is an intimidating and time-consuming process, especially if you’re a business executive in New York seeking to incorporate. Securing legal advice is paramount to structuring the organization correctly. Selecting lawyers who understand local regulations is essential—and especially so for entrepreneurs creating a venture in one of the last most complex states.

Incorporating has a range of benefits for businesses, such as shielding owners against liability and protecting personal assets. Becoming an official entity can also open doors for new opportunities down the road. It’s crucial to approach the process with an understanding of how to establish a corporate entity in New York, so the rest of this article will provide an overview of that information.

Forms of Incorporation — Sole Proprietorship, LLC, and More

Businesses in New York come in different shapes and sizes. Exactly what type of legal entity a business should be depends on the industry, the kind of assets it will own, the potential liability, and the tax implications.

The most common type of business entity used in New York is a C-corporation. Known as simply the “corporation,” it’s a separate entity from its shareholders and serves as the primary form for stockholders who will need to be publicly traded. Its products and services, as well as earnings, belong to the corporation rather than its creators and directors.

However, several other forms of incorporation exist as well. Here’s a brief overview of some of the other common structures available in New York:

Sole Proprietorship

A sole proprietorship is a form of business that has only one owner. It's not a legal entity, so all profits and losses are registered under the owner's personal name. Protection against personal liability isn't granted with this structure, so while it is the simplest type of business to form in New York, it might not be the best choice for most businesses.

Limited Liability Company (LLC)

An LLC, as the name suggests, is a type of company in which the owners’ personal property is generally protected from liabilities, which might arise from the company’s activities. The owners of an LLC don’t need to register the company with the state unless they are organizing under the LLC statute.

Partnership

A partnership in New York is a shared business venture among two or more people. It does not need to be registered with the state, but having a written agreement between the partners is a wise idea. A written partnership agreement should include the names of the partners, the duties of each partner, and the rules regarding the management of the business.

Cooperative Corporation

A cooperative corporation in New York is an organization created to do business for the mutual benefit of its members. It has limited liability, but is not a separate legal entity. The members of the cooperative own the company, and thus, profits and losses are distributed among the members.

Selecting the Right Business Entity in New York

The process of selecting the correct business entity depends on a number of factors, from the number of owners to the industry in which the business operates. Each business entity offers its own unique advantages, so it’s best to consult an experienced legal counsel who can help navigate through the complexities of this decision.

State laws in New York may also determine which business entity is the best option. For example, some states have restrictions on who can own a certain type of entity. It’s important to understand any special regulations in New York, so consulting a business lawyer who understands the state laws can be beneficial.

Structuring Ownership and Management

Once you’ve determined the best business entity to form, the next step is to structure the management and ownership. In New York, the structure of the corporation should be spelled out in its articles of organization. A business lawyer can assist in drafting a comprehensive set of articles that include the nature of the business, the members or shareholders, the duration of the corporation, and other provisions.

It’s important to note that New York law requires corporations to have a board of directors. This board may be composed of owners or shareholders or may be composed of independent individuals. At a minimum, boards typically include a president, a secretary, and a treasurer.

Tax Considerations in New York

Once the business is properly incorporated, the next step is to obtain the necessary permits, licenses, and registrations to operate. One of the most important steps is to obtain a federal employer identification number (EIN). This number serves as the business’s “tax ID.”

A business should also apply for the state and local sales tax licenses if necessary. For a business with employees, it’s important to also obtain a federal employer identification number, which will enable the company to file and pay employment taxes.

Final notions

Starting a business in New York is an intricate and challenging undertaking. Especially for business executives looking to incorporate, a range of issues must be addressed and decisions made correctly. It’s always advisable to seek the advice of experienced professionals who understand the local regulations to ensure the venture starts off on the right foot and is properly protected.

Topics:

Incorporation,

Business executives,

New York