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The Importance of Company Formation

On Behalf of | Aug 9, 2022 | Corporate Litigation

Founding a new company in New York is a complex matter, and there are a lot of ways to make sure that it is done in a way that will set the new business up for success. The first year for a business is the hardest, so it is especially important to take care.

Forming a business

Founders have several different options when it comes to how to structure their new business. For example, they can choose between whether to have a corporation or a sole proprietorship. These have very different levels of personal liability for the company’s debts and obligations, different tax treatments, and different ways of accounting for the income that they generate. They even have different costs to get them started because corporate models require more paperwork and the help of a lawyer. The business’s organization generally can’t be changed, so this is a highly important choice.

The business’s type can even influence how they grow. For example, an S-corp is designed for small businesses. It can only issue one type of stock and it cannot have more than 100 shareholders. C-corporations do not have these restrictions, but they are far more complex and costly to create as well as to operate. Business formation can therefore have an impact on the company for its entire lifespan by affecting how it does business and who can own it.

Business owners should think carefully about the type of organization they want to use for their new business and which would best fit their needs and goals for what the business will be and how it will grow.