At Schwartz, Fang & Keating, PC, we understand the law and its complicated facets. Our Long Island lawyers can help you turn your dream of operating a successful business through our business formation and planning services into your new reality. There are many benefits to running a business as a corporation as opposed to a partnership or operating as a DBA “doing business as.” In this two part post, we will discuss the basic differences and benefits to each for you, to see what aspects offer the greatest benefits to your business today and in the future. This week we will concentrate on the differences with sole proprietorships and partnerships in regards to business formation.
Different Forms of Business Entities
While you can likely operate your New York business, be it a construction company, restaurant, knit shop, or other boutique agency as many types of business entities, there is of course a “right” choice for you and your business based on your needs. Business operating entities, be they sole proprietorships or S corporations, hold certain benefits to the business. Our local Long Island attorneys can help you decide what is best for you. Check out the different forms of businesses here and see what benefits fit your needs best.
The benefit of operating as a sole proprietorship is that you have complete control and all of the decision making power, which you would have to share as a member of an LLC or as a partner in a partnership. There are no corporate tax payments or paperwork associated with being in the category, also known as a DBA, or “doing business as.”
In most states you will be liable however for self-employment taxes and other disadvantages, including being personally responsible for business debts or legal issues. Although a kind of “birth certificate” is issued when you create a name for your business, in the eyes of the law and the IRS you and your business are one in the same. If you are thinking of opening your business as DBA, we suggest speaking with one of our attorneys to ensure that it’s the best choice for your business.
A partnership is relatively easy to establish, but for many, not easy to maintain in a healthy way. This is due to the many liabilities of a partnership, in which each partner is liable for the actions of the other. For example: if one partner takes out a business loan for $200,000 without the other’s knowledge the other partner is still just as liable to pay back that money as if they themselves were the partner who took it out. If you wish to enter into a partnership you should do so with the legal help of a reputable law firm with many years of experience such as Schwartz, Fang and Keating, PC. Our Long Island lawyers specialize in corporate and business formation, estate administration and planning, will drafting and trust drafting.
LLC: Limited Liability Corporation
There are many benefits to creating a Limited Liability Corporation. An LLC is an entity in itself, and with the act of incorporating you will create the “corporate veil” dividing your personal assets from your business assets. This is a great benefit, as it will, in most cases, protect your person assets from ever being in danger should for instance your business get sued.
LLCs are considered pass-through agencies, meaning taxes are not paid on the business level but income/loss are reported on personal tax returns. Taxes that are due for the business would be paid through your individual tax return.
When starting a business it’s vital you consult with a lawyer to better understand your legal options. Next week we will discuss corporations and the benefits of starting one for your new business. If you’re in need of assistance in handling the legal responsibilities that go along with starting a new business, contact Schwartz, Fang & Keating, PC, Long Island’s best law firm.