When people start a new company or business in New York, it can be an exciting time. However, people need to plan for many different aspects of the business. The people starting the business understand the product or service they are selling very well, but there is much more to running a business than simply understanding how to produce a product or service. This starts with determining which business structure is the right structure for the business.
There are a few different options that owners can choose from when starting a business and which one is best depends on the size, type and ambitions of the business. Here are common types of business structures:
- Single Proprietorship – this is for individual business owners that have very few employees
- Partnerships – this is a basic structure for two or more business owners who are choosing to divide all profits and debts of the company between themselves in some manner
- Limited Liability Companies (LLC) – these create a separate company from the members who manage it. This means that the personal assets of the owners are separate from the company’s assets and debts. These are pass-through companies though, which means for tax purposes, the income of the business is taxed on the owners’ individual tax returns
- S-corporation – these are corporations that have shareholders who own the company. These also keep the business finances separate from the personal finances of the owners and are also pass-through companies like LLCs. There are some restrictions on the number of shareholders and who can be shareholders though.
- C-corporation – these are similar to S-corporations in that they have shareholders and the finances are separate from the owners. However, these are not pass-through companies and the company itself is taxed. The owners are taxed on the income they receive from the company on their tax returns. Also, there are fewer restrictions on the number of shareholders and who can be a shareholder.
Knowing the best business structure for a new business in New York can be difficult and consulting with experienced attorneys could be beneficial.