Limited Liability Company (LLC)
An LLC is a hybrid entity that is preferred by most new business owners. The LLC protects the individual members from business liability. In LLCs, the owners are called members. In LLCs, the members themselves are important to the LLC. One of the benefits of the LLC is that it is a “pass through” entity, allowing business profits and losses to pass-through to the individual members, to be reported on their individual income tax records.
In New York, LLCs have a publication requirement. Information on the LLC’s formation needs to be published in a county paper for a number of weeks, to inform the public of the formation. This is an expensive process that adds to the cost of LLC formation in NY, but is required to ensure you are protected from business liability.
A C-Corporation is a legal entity that is distinct from an individual. C-Corporations are owned by share holders. C-Corporations can have multiple share classes, allowing different owners to have different rights to dividend disbursements and voting. Unlike with LLCs, the shareholders of C-Corporations can change rapidly and often.
Corporate profits are taxed annually at the corporate tax rate. Then, when shareholders receive dividends, the shareholders are taxed at their personal income rate. This creates the corporation “double tax” issue. Despite this issue, corporations can be the right vehicle for certain businesses. Generally, businesses that want flexibility in share classes will file as corporations.
An S-Corporation is a corporation owned by shareholders that has very specific rules. It is called an S-Corporation because it is regulated by sub-chapter S of the IRS code. An S-Corporation can only have one share class, which is one of the major distinctions between it and a C-Corporation. Also, S-Corporation shares may not be owned by individuals who are not U.S. citizens, and an S-Corporation can not have more than 100 individual shareholders.
An S-Corporation is a C-Corporation that has elected to be taxed as a “pass through” entity. This means that the corporation does not pay corporate income tax. Instead the income or loss is “passed through” to the owners, and they report such on their individual income taxes.
A Not-For-Profit entity, a/k/a “Non-Profit” is an entity that is formed for a purpose that is not purely financial. There are many not-for-profit purposes, which can include private clubs, charitable organizations, religious organizations, organizations for the purpose of increasing education or health, etc. Very specific legal rules apply to Non-Profits. We help founders follow the legal rules and start their non-profit the right way.
Many professionals that want to operate their business as an LLC are required to form professional LLCs. This is a process by which the state requires additional assurances, proof, and approvals by licensing bodies, before the LLC can be formed. Holding yourself out as a PLLC implies that you are a state licensed professional in the field that you work in.
Many professionals that want to operate their business as a Corporation are required to form professional corporations. This is a process by which the state requires additional assurances, proof, and approvals by licensing bodies, before the corporation can be formed. Holding yourself out as a Professional Corporation implies that you are a state licensed professional in the field that you work in.