Whether you’re a budding entrepreneur or an established business looking to transition to a C corporation structure, understanding the legal and practical implications is essential. Most new business owners in need of legal counsel are unable to commit to the expense and long-term engagement offered by large firms. Thankfully, business owners in New York now have access to UpCounsel’s network of qualified and experienced legal professionals suited to serve their needs on a project, task, or contract basis.

For those unfamiliar with the concept of a C corporation, it is essentially a separate legal entity owned by shareholders that protects the personal assets of business owners.The C corp. structure will be applied when a business files its state documents and pays taxes separately from shareholders. After that’s settled, the business will assume legal responsibility for any direct or indirect debts, torts, or obligations it incurs.

Given the complexity of New York corporate codes and regulations regarding C corporations, there are a number of factors business owners should consider from a legal and financial perspective prior to forming a C corp. The five primary issues to consider follow.

1. Subchapter vs. Standard C Corporation Structure

The state of New York gives business owners the option of forming their C corporation as a “regular” C corporation or a subchapter C corporation. Contrary to using a standard C corporation, a subchapter C corporation allows a business, if it meets the criteria, to pass net operating losses, deductions, and credits to its income tax returns which are also filed with the state. However, this can simplify a company’s filing process and paperwork.

2. Choosing a Corporate Name

Choosing an available business name is an important first step with any new business; it communicates the identity and brand of the enterprise. When selecting a C corporation name, it’s important to ensure the name does not violate intellectual property law. An experienced business lawyer can assist you with researching the availability of your proposed name.

3. Structuring Shares and Ownership

When forming a C corporation, business owners must decide on the types of shares to issue and the percentage of total shares owned by each shareholder. It’s important to ensure appropriate ownership records are maintained which reflect the total authorized shares of stock belonging to each shareholder. A qualified attorney can assist you in understanding your different options and making the ideal choice for your business.

4. Obtaining Capital through Financing

When it comes to capital and financing, a C corporation may utilize a variety of options including debt financing, issuing of additional stock, venture capital, or angel investing. An attorney can provide advice on the most suitable financing options for your business.

5. Understanding Compliance and Bylaws

Adhering to state and federal statutes is fundamental to any profitable business enterprise. This includes compliance with corporate law, employment law, taxation law, and environmental law. A qualified attorney can help you ensure you’re following all the necessary regulations and statutes. Moreover, preparing a comprehensive operating agreement or bylaws that provides instruction on how the board of directors will run the corporation will establish order and organization from the start.

Forming a C corporation in New York requires a thorough understanding of state filing requirements and the limitations of the C corporation structure. UpCounsel’s network of experienced New York lawyers can help business owners pave the way for the successful formation, management, and growth of their venture. Services range from forming, operating, and dissolving a corporation, to issuing stock, protecting intellectual property, and more. With UpCounsel attorneys handling projects both big and small, peace of mind is only a few clicks away.

Topics:

C Corporation,

New York,

Business Lawyer