There are multiple options available to those who want to start a business in New York. For instance, if you don’t like doing paperwork, it may be best to operate as a sole proprietor. However, if you want to enjoy liability protection and potentially minimize your tax rate, it may be best to operate as a limited liability company or corporation. Ideally, you will talk to an adviser before deciding how to structure your organization.
Why should you ask for help when choosing a business structure?
Your company’s structure will have a significant impact on its ability to attract customers or raise funds. It will also have a significant impact on how the company is taxed and what happens if a judgment is rendered against it. As a general rule, sole proprietors cannot sell shares of stock and must classify all of their net income as wages. Meanwhile, most other entities can sell shares of stock and classify income as an owner’s draw. Furthermore, owners have an easier time protecting personal assets against being seized if their companies are found to have committed business law violations.
You can typically change business structures at a later date
In most cases, you can change your business structure as the firm evolves and grows. For example, if you start out as a sole proprietor, you may be able to register it as an LLC or corporate entity if you need greater liability protection or want to take on investors. You can contact state or federal government agencies to learn more about the process of making such a change as well as how much it might cost to do so.
Selecting a business structure is one of the most important decisions that you’ll make as the owner of your firm. If you don’t consider the potential pros and cons of each type of entity before making a decision, you could doom your company to failure before it serves its first customer.