Entrepreneurs take great risk to get a business running. A large amount of time and dedication is required, but some of the risks inherent to starting a business can be mitigated by incorporating the business.
As a result, entrepreneurs can benefit from a basic understanding of the different business entities that are available. Many of the laws that govern these entities are creatures of the state. As such, this piece will focus on business formation and New York law.
Two of the more common forms of business entities operating in the state that will be discussed in this piece are limited liability companies (LLCs) and corporations.
Risks and benefits of incorporating as a corporation in New York
A corporation is defined by New York's Department of State, Division of Corporations, State Records & UCC as "a legal entity separate and distinct from the individual(s) who compose the business. It has rights and abilities similar to those of a natural person." This entity provides the creator with protection of personal assets, a process referred to as limited liability.
Maintaining a corporation does require certain criteria are met. This includes holding meetings, having directors and keeping records such as by-laws and meeting notes.
Risks and benefits of using an LLC in New York
An LLC is defined as a "business organization of one or more persons who have limited liability for the contractual obligations and other liabilities of the business." It is essentially a "hybrid form" that allows entrepreneurs the protections present with the corporation while maintaining a greater level of flexibility.
An LLC does not require as much upkeep as a corporation.
Which business entity is right for my New York business?
These are the basics of just two options available to entrepreneurs in New York. Those who are considering moving forward with organizing their business are wise to seek legal counsel. An experienced attorney can discuss the risks and benefits of each option, helping to better ensure the right entity is chosen to protect your business interests.