Choosing your corporate structure is one of the most important decisions you’ll make as a business owner. New York recognizes several different types of business structures ranging from sole proprietorships to corporations. As a business owner, your legal rights and obligations, tax responsibilities, and personal liability are all impacted by the type of corporate structuring you select. Making an informed choice can impact the success of your business which is why consulting with a business law attorney is necessary.
NYC Corporate Structuring Attorneys
At Woods Lonergan PLLC, we have represented many corporate clients, assisting them in a wide range of corporate structuring matters. We understand how important choosing a legal entity and structuring your business will be for your business. After evaluating your goals and needs, we can help you create a corporate structure that is beneficial in the long term and protects you from liability. Contact Woods Lonergan PLLC to discuss your corporate structuring matter.
Forming a Corporation in New York City
Trying to select a legal entity can be overwhelming, especially when you’re starting a new business. However, choosing the correct type of legal entity can help you protect your personal and business assets and limit your tax liability. Many New York business owners decide to form a corporation because it offers the most personal asset protection.
One of the main benefits of using the corporate structure is to create a unique legal entity that is separate from you as the owner. The owners of a corporation are shareholders and typically elect a board of directors to oversee major decisions. One of the downsides of forming a corporation involves the amount of documents and time the owner will need to spend managing the corporation.
The first step in forming a corporation involves one or more persons, called incorporators, signing and filing a Certificate of Incorporation. They will need to file the completed certificate of incorporation with the Department of State. After the certificate has been filed and the corporation has begun, the incorporator or incorporators need to hold a meeting to adopt bylaws, elect directors, and transact other business.
Corporations are required to keep accurate and complete accounting and books including the minutes of the proceedings of the shareholders, executive committee, and board of directors. Additionally, corporations need to keep a record of the names and addresses of all the shareholders, the number in a class of shares held by each, and the dates that they became orders. As the owner of a corporation, you’ll need to ensure an annual meeting of shareholders for the election of directors and the transaction of any other business.
The Difference Between S and C Corporations
There are two main types of corporations in New York, C corps and S corps. An S corp is a standard corporation or limited liability company established in New York that has elected to be treated as an S corporation for tax purposes. S corporations are separate legal entities that can enter into contracts and engage in other business activities. S corporations are typically more affordable and provide a structure that most people feel familiar with. With an S corporation, the owner may be able to decrease his or her self-employment taxes.
Many people choose S corporations because they allow pass-through taxation. S corporations file an informal federal tax return, but no income tax is paid at the corporate level. The profits and losses are passed through to the business and reported on the business owner’s personal tax return. C corporations are separate taxable entities required to file a corporate tax return, called Form 1120. They pay taxes at the corporate level and face the possibility of double taxation if business owners receive corporate income as dividends, which are considered personal taxable income.
The Benefits of Working with a Corporate Structuring Attorney
There are a significant amount of responsibilities that come with forming a corporation. Working with a corporate structuring attorney can ensure that you start your corporation out correctly with thorough and legally enforceable documents. An attorney will help you structure your corporation in a way that is advantageous and makes running your corporation as smooth as possible. Additionally, an attorney can help you ensure that you meet all of a corporation’s requirements under New York State law. If any disputes arise during the structuring of your cooperation, an attorney can advocate for your best interest.
Professional Service Corporations
If you are a professional who provides professional services, you also can form a professional service corporation. In New York, one or more professionals may create a professional service corporation (P.C.). Professionals can use the corporation to render professional services that they are authorized to practice. Attorneys and licensed physicians, as well as some educational professionals, most often use professional service corporations. Protecting personal assets from lawsuits is one of the main benefits of creating a professional service corporation in New York.
Changing How Your Corporation Is Taxed
When you first incorporate your business in New York, you have to choose whether your corporation will be taxed as an S corp or a C corp. As your business grows and expands, you may find that you need a different tax structure for your corporation. Perhaps your business goals have changed, and you weren’t initially interested in an IPO, but now you are interested.
In other cases, the tax laws change, making your business better off with a different tax structure. If you consider whether you’d like to change your tax structure, the attorneys at Woods Lonergan PLLC are here to help. We will evaluate your tax situation and advise you of whether changing to an S or C corp will benefit you. We can also help you make those changes.
Contact an NYC Corporate Structuring Attorney Today
Structuring a corporation can be complicated, and it’s wise to work with an experienced business attorney when doing so. The experienced business attorneys at Woods Lonergan PLLC are here to help you make an informed decision about your business structure. Once you decide which business structure you’d like, we will help you with your corporate structuring needs. Contact us today to schedule your initial consultation.
Woods Lonergan PLLC helps clients with corporate structuring throughout NYC including the boroughs of Manhattan and Brooklyn.