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Plan your company structure to reflect your goals

On Behalf of | May 11, 2022 | Business Formation And Planning

There are many ways to structure a business in New York. You can form a sole proprietorship, S-corp, C-corp, or LLC. The form that your company takes should be a reflection of the goals you have in mind for it. You need to decide if you wish to cater to the members who form it or the clients who patronize it.

Different structures have varying issues with taxes

One of the central issues with business formation & planning will be taxation. A sole proprietorship is not considered to be a separate entity from its founder. This means that it will not be taxed separately. This won’t matter much if you are the sole person operating the business since you don’t have others to provide for.

Both types of corporations, as well as LLCs, are pass-through entities. This means that the income generated by the business will be passed on to the members or shareholders. There is no need for a separate business income tax.

A C-Corp will be taxed at the entity and shareholder level. An S-Corp will not usually face federal income taxes at the entity level. The income of LLCs and S-corps will be taxed at the shareholder or member level. This will happen regardless of the way cash is distributed.

LLCs are best for issuing stock

The structure of your company is an essential part of your initial business plan. If you plan to offer equity rewards, you can choose from any of the four categories.

If you plan to issue stock, you may prefer to structure your company as an LLC. This is because LLCs have the most flexibility when it comes to issuing multiple classes of stock. S-corps can issue only one kind of stock and can’t have more than 100 members.