BUSINESS CORPORATIONS FAQ
Trainor Law PLLC
You’ve done your research, picked out a great name, web domain and phone number but how do you become legally recognized as a business? Every business has pros and cons. Once you have the building blocks of how to build a great company, its time to get down to the nuts and bolts and not so glamorous side of starting your own business. Below is an overview of different types of businesses.
Business Corporation Types
The types of businesses that operate in New York are business corporations, not-for-profit corporations, limited liability companies, general partnerships, limited partnerships and sole proprietorships.
- Business Corporation – a business corporation is a legal entity separate and distinct from the individual(s) who compose the business. It has rights and abilities similar to those of a person. The corporation has the right to enter into contracts, take legal action against others, give and receive loans, own assets, hire workers and pay taxes.
- Professional Service Corporation – one or more professionals may form a professional service corporation (P.C.) for profit for the purpose of rendering professional service or services that the professionals are authorized to practice. This includes a “Profession” as defined in Section 1501(b) of the Business Corporation Law, which includes licensed physicians or attorney and counselors-at-law.
- Limited Liability Corporation (LLC) – is a business structure that combines pass-through taxation with the limited liability of a corporation. An LLC is not a corporation – it is a legal form of a company that provides protection and limited liability to its owners. In simpler terms, if a corporation and a sole proprietorship had a baby, they’d name it LLC.
- S Corporation – a business entity that is federally taxed as a pass-through entity by the IRS. The S corporation issues stock and is treated like a business corporation. The owners of the S corporation are shareholders and they are protected from liability just as any other incorporated business. When you have an LLC, you can request S Corp status. You should consult with your attorney and/or accountant on the tax ramifications of this.
- General Partnership – all owners (or general partners) are equally responsible for the debts of the business, each assuming unlimited liability.
- Limited Liability Partnership – is where the partners assume as little responsibility as possible across the entire partnership.
- Sole Proprietorship – is when someone owns and runs the business themselves. The business is unincorporated. This is complete control of the business and profits as well as personal liability of the business debts.
- 501c3 Organization – is a corporation, trust unincorporated association or other type of organization that is recognized as tax exempt by the Internal Revenue Service (IRS) and offers many advantages if your organization receives donations. When you have an active 501c3 status, it may allow donors to receive a tax deduction, provides increased ability of the organization to receive grant funding eligibility and increases credibility within the community.
- Certificate of Assumed Name – corporations, limited liability companies and limited partnerships are required to conduct activities under their true legal name. If they desire to conduct activities under a name other than their true legal name, a certificate of assumed name complying with Section 130 of the General Business Law must be filed with the New York State Department.
Once you know what type of business you would like to operate, your next step is to consult an attorney to find out if the name is available and make sure all the proper paperwork is filed and signed. Your accountant should work alongside your attorney and to make sure every aspect of your business is clear and executed properly.
As your business grows and flourishes from year to year, an annual meeting is held by the shareholders, members and/or directors to make sure any yearly announcements or changes are recorded in the minutes of record. This information is kept in your corporate book.
With your new venture of starting a business, you may have many questions and concerns that can be answered by your attorney. They will review filing costs and possible publication requirements depending on what business you decide to operate. Make sure your questions or answered and you feel comfortable with the business you choose.
If you need help starting your business, contact our office at (518)-899-9200 or contact us to see how we can help you.
This article is intended to be educational and is not intended to be legal advice, which can only be given after an attorney-client relationship is established.