NYWIB Business Structure Planner

Worried about liabilities & lawsuits?

Yes

No

Two or More

Individual

Corporation

  • Legal entity separate and distinct from owners (shareholders)
  • Shareholders (owners) liability is limited
  • Less expensive to set up than LLC in New York State

Subchapter-S Taxation

Advantages
  • No federal income tax to the corporation
  • Income taxed to shareholders personally
Disadvantages
  • Shareholders limited to US citizens or permanent residents
  • One class of stock
  • Max 100 stockholders
  • Five other limitations
  • Limitations on certain expense deductions
  • May require additional tax filing annually in NY state

Subchapter-C Taxation

Advantages
  • Pays corporate income tax
Disadvantages
  • Double taxation on dividends when declared

LLC

Advantages
  • Members’ liability limited
  • LLC income taxed to members personally
  • Foreign ownership OK
  • Greater flexibility in allocating profits/ losses and in delegating responsibilities
  • No limitations on membership in other legal entities or partnerships
  • May avoid state and federal security laws
Disadvantages
  • Maximum of 30 years in duration
  • No more than TWO of four characteristics of a corporation
  • Must adopt a written operating agreement
  • Must publish notice of LLC formation
    1x/ week in two newspapers for six weeks in New York State
  • State taxes based on number of members

No

Two or More

Individual

LLC

Advantages
  • Members’ liability limited
  • LLC income taxed to members personally
  • Foreign ownership OK
  • Greater flexibility in allocating profits/ losses and in delegating responsibilities
  • No limitations on membership in other legal entities or partnerships
  • May avoid state and federal security laws
Disadvantages
  • Maximum of 30 years in duration
  • No more than TWO of four characteristics of a corporation
  • Must adopt a written operating agreement
  • Must publish notice of LLC formation
    1x/ week in two newspapers for six weeks in New York State
  • State taxes based on number of members

Partnership

Advantages
  • Easy to organize and register
  • Possibility of greater financial strength
  • Combined managerial skills and judgment
  • Business entity not taxed federally
  • Partners report their share of profit or losses on their individual tax returns
Disadvantages
  • Unlimited personal liability of partners
  • Divided authority for decision making
  • Needs partnership agreement and lawyer to create one
  • Can be hard to find suitable partners
  • Harder to raise additional capital

Sole Proprietorship

Advantages
  • Easy to organize, start and register
  • Owner makes all the decisions
  • Minimum legal restrictions
  • Owner gets all the profits
  • Business easy to discontinue
  • No separate business entity to tax
  • Profits/losses reported on owner s personal tax return
Disadvantages
  • Unlimited liability of owner
  • Hard to raise outside capital
  • Business terminates at owner s death
  • Business endangered by owner s illness
  • Big responsibility for making all decisions

NOTE: U.S.Non-residents are only permitted to form LLC corporations

0
    Your Cart
    Your cart is empty