New York LLC or Corporation
New York is one of the few states that boasts of a growing economy, robust infrastructure, and strong financial markets. The state is placed third in terms of Real Gross Domestic Product (GDP) with the finance, insurance, and real estate industry being on the top as it added a real value of $433.95 billion to the GDP. There are several different forms of businesses that you can choose from in the state like a Business Corporation, Limited Liability Company, General Partnership, Limited Partnership, and Sole Proprietorship among others. Since the cost to form a New York Corporation is lower in New York as compared to some of the other states, many entrepreneurs prefer to form a corporation or an LLC in the state.
Which business entity should I choose for a New York business?
If this is the first time you are starting a business then one of the foremost steps is to identify the legal structure for your company. The business structure should be chosen after researching and analyzing the pros and cons of each type of business structure. This is more so as the structure chosen will have a significant impact on several key areas of your business like the annual maintenance cost of a New York Corporation or LLC or any other form of business, legal liability, taxation, and ownership control of the company. Here is a list of areas that will help you to identify the right structure according to your requirements.
- Limited Liability Protection – One of the most important aspects to consider apart from the cost to form a New York LLC or corporation is liability protection. This type of protection simply refers to avoiding any personal liability for any debts of the company owned by you. Liability protection is not offered by all forms of businesses and can play a defining role in reducing the New York LLC annual fee.
- Pass-through taxation – Pass-through taxation refers to the passing through of taxes from the business to the owners or members. There are specific forms of businesses where this type of taxation is possible and in such a scenario, the business taxes are filed through the personal tax return of the owners of such a business. Hence, there will be no double taxation and this in a way simplifies business taxation.
- New Business Cost – The cost to form a New York LLC or a business corporation is not the only cost that will come into play when you establish a new company. There are also several factors that will be responsible for determining the total cost to incorporate in New York and these include the following components:
- Reserving of business name
- Filing of annual taxes
- Correction and amendments
- Filing Annual reports or Biennial Statement
- Renting or lease commercial space
- Hiring Employees
- Buying or renting office equipment
- Obtaining business licenses and permits
Pros and Cons of forming an LLC or Corporation in New York
New York is the perfect place to start a new business as it is the financial hub of the nation and has much to offer in terms of commercial space, talent, business incentives, and transportation infrastructure among others. This is one of the reasons why entrepreneurs prefer to form a corporation or an LLC in the state, both of which are considered as business structures with numerous benefits. Of course, the cost to form a New York Corporation may be different from that of an LLC and there are several pros and cons of forming a limited liability company and a corporation.
New York LLC
A New York limited liability is one of the most popular business structures especially if you are looking for tax benefits. An LLC has several advantages and a few disadvantages as well. Here are some of the pros and cons that will help you make an informed choice.
Pros of LLC
- If you form an LLC in New York then you will be able to enjoy the flexibility of being taxed as a sole proprietor, C corporation, partnership, or can even elect for S corporation
- The cost to form a New York LLC is less as compared to some of the other forms of business entities
- You will require less paperwork when it comes to new business formation
- The formation cost of New York LLC will depend on whether you form a single-member LLC (with one person) or multiple-member LLC (several people)
- Members of a New York LLC will enjoy limited liability protection against legal issues or debts
Cons of LLC
- If you form an LLC in New York then apart from the cost to form New York LLC, you will also be required to file taxes
- As an LLC member, you will not be on the payroll of the company and instead will be paid through distributions
- Angel investors and VC’s prefer a New York Corporation over an LLC when it comes to funding
- It is quite complex and hard to transfer ownership in an LLC as compared to a corporation
Are you thinking of starting an LLC in New York?
New York Corporation
A business corporation in New York is one of the most favored structures in the state because most investors and seed-stage funders prefer this organizational structure. A corporation does have several benefits and a few disadvantages as well. They are:
Pros of a Corporation
- A business corporation helps to protect your personal assets implying that creditors of a New York corporation can seek payment only from the assets owned by the corporation.
- The cost to form a New York Corporation is less as compared to some of the other states.
- One of the advantages is that you will have easier access to capital including investors.
- Perpetual existence is another salient aspect of a corporation and it means the entity can continue to exist indefinitely even after the owners or directors are not there.
Cons of a Corporation
- Although the cost to form a New York Corporation is low, there are some other costs that can affect a corporation as it undergoes double taxation. This means the business pays taxes on the income and shareholders pay tax on dividends.
- The process to incorporate in New York can be time-consuming and may involve a lot of paperwork
- A business corporation follows quite a rigid structure and has less flexibility than some of the other forms of business like an LLC.
Do you want to start a New York corporation?