Forming a new business can be an arduous task. At Underberg & Kessler, we have a team of attorneys experienced in formations that are genuinely excited to help you formalize your business and bring your great product or service to market. There are many considerations in choosing the type of entity best suited for your business. Our attorneys will guide you throughout the entire process starting with an entity selection consultation and will complete and file the appropriate formation documents and draft organizational documents for your records. Our lawyers offer assistance and guidance with the following entity types:
What is a sole proprietorship?
A sole proprietorship is a business entity where one person owns and runs the business. There is no legal distinction between the individual whom owns and runs the business and the business itself. This means all assets, liabilities, debts, profits and losses the business accrues are all the responsibility of the individual who runs and owns the business. A sole proprietor may hire employees. A sole proprietorship offers it's owner pass-through taxation, which means income derived from a sole proprietorship is treated as income of the owner for tax purposes. Financial and tax accounting is simpler for a sole proprietor, but the risk of personal liability is imposed on the sole proprietor.
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Limited Liability Companies (LLC)
What is a limited liability company (LLC)?
A limited liability company or LLC is a business entity type that provides limited liability and great flexibility to it's owners. It can be used to provide the pass-through taxation of a partnership or sole proprietorship with the limited liability of a corporation. Also, depending on the situation, LLCs may choose to use Subchapter C or S corporate tax rules or partnership or sole proprietorship flow through tax treatment. An LLC provides it's owners with limited liability. Any debts or lawsuit damages of the business are restricted to the business, and not it's owners or investors.
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What is a corporation?
Corporations are organizations created by and recognized in law, to act as a business entity separate from its owners. Corporations have the ability to issue stock in multiple classes and series. Corporations are formed by filing with the government and must identify a person or business designated to receive legal service of process on behalf of the entity. Corporations, offer their owners limited liability due to the separation of the business from the individual owners. Every corporation begins life separately taxed as a C corporation. Qualifying corporations and their shareholders may elect flow through tax treatment under Subchapter S of the Tax Code. A separate type of entity, the not-for profit corporation, can be established and qualified as a tax free entity.
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What is a business partnership?
A business partnership can take on many different forms. The three legally recognized New York forms a partnership can take are:
All partners participate in the management of the business and are jointly and severally personally liable for all of it's debts, liabilities and obligations. It is best practice to have a written partnership agreement, but none is required by New York State law.
Limited Partnership (LP)
Limited partnerships operate much like a general partnership, and are required to have a written partnership agreement. General partners are jointly and severally personally liable for partnership debts, liabilities and obligation, but limited partners, who concede the right to manage the business, are shielded from personal liability.
Limited Liability Partnership
This is a formation option available only to licensed professionals, which enables a degree of limited liability to all partners, but the partners remain liable for their individual acts of malpractice.
There are numerous other nuances to be aware of in order to make the best formation decision for your business. Partners can have different compensation and involvement levels. There can be salaried partners, equity partners and silent partners. Salaried partners have no ownership interest in the business as equity partners do. Individuals can form a partnership and businesses can as well.
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What is a benefit corporation?
Benefit corporations result from the current wave of social entrepreneurship. A benefit corporation is formed to provide a general public benefit or a specific public benefit. General public benefit is a material positive impact on society and the environment, taken as a whole, assessed against a third-party standard, from the business and operations of the benefit corporation. If you hear talk of a “B corporation” that refers to the third-party standards organization, B Lab Company (). Specific public benefit, as set forth in the certificate of incorporation, can include promoting economic opportunity, improving health or promoting arts and sciences or the environment.
In most ways, a benefit corporation is the same as a regular business corporation. However, the standards of conduct for directors and officers of a benefit corporation differ from those that apply to directors and officers of a New York business corporation. The benefit corporation statute incorporates an enumeration of factors that the directors and officers must consider and others they are permitted to consider in making business decisions, most of which do not include maximizing profits of the business or return to its shareholders.
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What is a professional entity?
Licensed professionals (attorneys, accountants, engineers, physicians, and the like) who wish to practice their profession in entity form may not do so through a regular business corporation or LLC. These professional who wish to obtain some of the liability shield of an entity may choose from four New York forms: limited liability partnership, professional corporation, professional limited liability company and, solely for architects and engineers, a design professional corporation. Note that none of these entities can shield an individual practitioner from his or her own acts of malpractice.
For more information on professional entities click here.
Business Formation Experience
Our Experience in Western, NY and Beyond
Represented numerous start-up businesses in the selection of the appropriate form of business entity, organization of that entity, counseling on day-to-day operational issues and drafting of routine business documents.
Advised independent veterinarian on whether formation of entity was necessary based on structure of services agreement, whether there would be employees and extent of insurance coverage.
Represented digital marketing company in formation of limited liability company and drafting of related service and non-disclosure agreements.
Represented veterinarian in formation of professional limited liability company, including obtaining necessary consent from New York State Department of Education.
Represented family-owned construction company in corporate formation and election to be treated as s-corporation.
Represented community organization in formation of not-for-profit corporation and in obtaining 501(c)(3) tax-exempt status.
Represented local honor guard chapter in forming a not-for-profit corporation and in obtaining 501(c)(19) status.