Choosing the Right Type of New York Corporation
New York is a great state in which to start a business. From the metropolis of the Big Apple to the other cities and regions of the Empire State, there are plenty of opportunities for entrepreneurs. If you’re looking to form a corporation in NY, you’re in the right place — this is where we’ll guide you through every step of what you need to do to start a business in New York State.
Should You Form an LLC, an S Corporation or a C Corporation in New York State?
Most New York entrepreneurs will need to decide between making their business an LLC, an S Corporation or a C Corporation. Each entity is treated differently by the NY Department of State, the law, the IRS and other official bodies.
Here’s a quick overview of each type of business entity.
There are some other business entity structures, including nonprofits, Limited Liability Partnerships (LLPs) and B Corporations, but they will not be relevant for the majority of entrepreneurs.
The Advantages of Forming a Corporation in New York State
New York corporations have several benefits for business owners.
- New York corporations provide the strongest form of liability protection possible. They insulate your personal assets and finances from those of your business.
- This means that any liabilities created by your corporation (debts, obligations, damages, bankruptcy or other liabilities) should not impact your personal money, property or assets — they are considered completely separate from a legal perspective.
Choosing a New York S Corp or C Corp Over an LLC
There are several reasons an entrepreneur might choose to form a NY corporation instead of a New York LLC.
When you incorporate a business as a corporation, the New York Department of State will treat your business as a C Corporation by default. A C Corporation will become an S Corporation when all shareholders wish to change the corporation’s status to an S Corporation with the IRS. You can make this choice when you first form your New York corporation or at any time after you incorporate.
There are some similarities and some differences between S Corps and C Corps:
- Similarities: New York S Corporations and C Corporations have similar rules and regulations for liability, governance, management and ownership
- Differences: Key differences are taxation and the ease of buying, selling and transferring stock
Taxation Benefits of a New York S Corporation Over an LLC
A New York S Corporation will often pay less self-employment tax on owner earnings than an LLC. Note that a NY LLC can choose to be treated as an S Corporation for tax purposes by filing Form 2553 with the IRS, which removes this restriction. New York C Corporations do not have this advantage over an LLC.
New York State S Corporations and C Corporations Make It Much Easier to Transfer Stock and Ownership
If you want to easily transfer ownership through buying and selling stock, you will need a NY C Corporation or an S Corporation. C Corporations have much more flexibility than S Corporations, and both are better than LLCs for stock and ownership transfers.
If You Want Maximum Flexibility for Buying and Selling Stock, Choose a New York State C Corporation
The Advantages of S Corporations in New York State
The Advantages of C Corporations in New York State
In addition to the general benefits above, New York C Corporations provide several other advantages.
Important Points About Forming a Corporation in New York
Here are some areas to be aware of when you’re creating a corporation in New York.
First, NY corporations are formed on the state level by filing Articles of Incorporation with the New York Division of Corporations. Incfile specializes in helping entrepreneurs form New York S Corporations and C Corporations and can collect the information and file this form on your behalf.
Rules and Regulations for New York Corporations
All New York corporations must follow stringent compliance rules and regulations. These include financial reports, bylaws, corporate formalities, taxes, fees, business licenses and the like. You can find links to these below.
Are you ready to start your New York corporation? If so, we can help. We provide comprehensive corporation formation services for both S Corporations and C Corporations in New York.