Starting your own business is an exciting venture. You have probably heard the terms LLC and LLP and are wondering which three letters should be after your business name. There are benefits and drawbacks associated with each that should carefully be considered for the best interests of your business.
- To initially form an LLC, you must file Articles of Organization with New York State, in addition to the publication requirement- you must publish notice of your company once a week for 6 weeks in 2 different publications.
- An LLC may consist of one or more members and is contractual in nature.
- Can be managed by its members as managers, or outside managers with no ownership interests in the LLC can be appointed.
- An LLC has legal status independent of its individual matters.
- Members are usually not held liable for the debts of the LLC, but can be held liable for the acts of the LLC for acts involving fraud or deception.
- Distribution of profit is proportional to contribution of each member.
- May be taxed as a partnership or a corporation.
- Avoid double taxation.
- An LLC’s existence does not end unless an end date was provided for in the operating agreement.
- Is formed when two or more people enter business as co-owners for profit.
- All partners have equal rights in management and conduct of the partnership.
- No partner is liable for the debts or negligence of another partner.
- Each partner is entitled to a return based on contribution.
- Profits and losses must be reported on each partner’s income taxes.
- Avoid double taxation.
- Dissolves at the will of the partners.
In addition to LLC’s and LLP’s, other options for structuring your business such as forming a P.C. or a corporation. A P.C. is a way of structuring a business that provides professional services. A P.C. may be a good option for you if you are a lawyer, doctor, accountant, etc. A P.C. can offer many benefits such as creating retirement plans for employees under its structure, and getting certain tax breaks. If you are looking to form a company that can issue stock and has clearly defined management structure, a corporation may be in the best interests of your company.
It is important to be informed on how you choose to structure your company. How you form your company now could have significant tax and management consequences in the future. It is best to contact an experienced attorney who will be able to advise you regarding your growing business. Call Bellavia, Blatt & Crossett, P.C. at (516) 873-3000 or (631) 224-7000.