Starting a business?
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Which Business Entity is Right for Me?

When forming a business, the first thing you should do is examine your needs. There are four main types of business entities: partnerships, limited liability companies (LLC), sole proprietorships, and corporations. Some things to consider include: tax implications, cost of formation and ongoing administration, flexibility, future needs, and legal liability. An attorney can assess your business’s needs and ensure the correct entity type is formed. 

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Partnerships & LLCs

Partnerships are a simple structure where two or more people own a business together and agree to share the profits and losses. Partnerships can be risky, as each partner can be personally liable for other partners’ actions and financial obligations. LLCs are a hybrid entity that protects personal assets and shields the personal liability of their owners while offering individual tax benefits from the income or loss of the business. LLCs are a popular choice for medium-risk businesses. Partnerships and LLCs must be registered with the state. Documents such as a partnership agreement or an LLC operating agreement will need to be executed for both. Having a competent attorney’s help can be key when creating partnerships and LLCs. An attorney can draft the necessary documents and confirm that your business is registered correctly in New York State.

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Sole Proprietorships

A sole proprietorship is the simplest form of business and is standard for individual business owners. A sole proprietorship offers complete flexibility and control over the company. However, there are risks associated with sole proprietorships because they do not form a separate legal entity. This means that your business assets and liabilities are not different from your personal assets and liabilities, so the business owner can be held personally liable for the debts and obligations of the business. Nevertheless, a sole proprietorship can be suitable for a small, simple, low-risk business.

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Corporations

Corporations form a taxable and legally liable entity that shields its owner’s personal assets against business difficulties or lawsuits. Corporations must prepare bylaws, register with the state, follow careful record-keeping, and typically have a far more complicated ownership structure than other entities. It is key to hire a business attorney when setting up any corporation. When forming a corporation, an attorney can assist in considering the differences in business tax implications between an S-Corporation and a C-Corporation.