While New York City took a substantial hit as a result of the economic recession, it is well poised to take off in 2011. The city's blossoming tech startup scene has shown great promise and attracted the likes of several Silicon Valley bigwigs.
As much of the Big Apple's recovery has been thanks to its trove of small businesses, many can anticipate a surge in business filings this year, with small firms seeking corporate status to protect the personal assets of their proprietors.
Startups, are by default, sole proprietorships or partnerships, wherein the company is not legally distinguished from its owners. Accordingly, most small businesses ultimately seek entity status to protect the proprietors from individual debt, tax or legal obligations.
The most common entity classifications among small firms looking to incorporate in New York City will be that of the limited liability company, which combines the benefits of a sole proprietorship with the protection of large corporation. These structures allow all financial conditions - debt, credit, profits, losses - to be declared on members' tax returns. However, they also do not distinguish between salaries and outside investments or donations and, therefore, all forms of income are subject to appropriate tax procedures.
For large companies, the C corporation is the most common entity status. "Because its shares can be freely traded among an unlimited number of owners, the C corp is the most tax-efficient vehicle for taking a company public," writes Inc. magazine. "It is also the best vehicle for a tax-free merger in a stock swap."
Tags : c corp, incorporation, llc, ny
Posted: Jan 17th, 2011