In the state of New York, there are several different business structures for entrepreneurs to choose from. Each structure operates differently under the law and produces different outcomes regarding administration, taxation and more. Take your time researching the different options available before coming to a decision.
Types of Business Structures
Business law in the US provides for the creation of the following different business structures:
- Sole proprietorship
- General partnership
- Limited partnership
- Limited liability company
- C corporation
- S corporation
Sole Proprietorships and Partnerships
Traditionally, when people think of small business owners, they think of a sole proprietorship. A sole proprietorship is a business that is wholly owned by a single individual. In regards to debt, legal liability and everything else concerning commercial law, a sole proprietorship is directly tied to that one individual.
In a partnership, this responsibility is split by two joint owners in either a general or limited fashion. Unlike a general partner, a limited partner does not have direct control over the operation of the business and has less liability than the other partner. An example of a limited partner would be an investor who enters into a limited partnership by registering with the government.
Corporations and LLCs
Becoming a sole proprietor or a partner often requires taking on a significant tax burden and direct liability for the business. One way to lessen these issues is to form a corporation or an LLC. These options create a legal business entity separate and distinct from the founders of a company.
Regarding corporations, this is done through the issuance of stock and the formation of a board of directors. The business entity becomes liable for lawsuits instead of the owners. Limited liability companies also act to protect business owners from liabilities, both financial and legal, and do so without the structural complexity of a corporation with stockholders and a board.
Don’t rush into starting a business. Perform enough research to make a more informed choice. This should include research regarding what legal structure to choose for your company.