Starting a business is a serious decision. While there are many potential benefits to doing so, there are also risks. Many of the hazards that new business owners encounter are legal in nature. It therefore makes sense to have an experienced attorney help get your company off the ground.
Are you ready to start your business? The New York business lawyers of Rosenbaum & Taylor review a few of the major steps involved in doing so.
Choosing the Right Legal Entity
One of the first steps in starting a business is to decide how it will be organized. You have several potential options, each of which has its own advantages and disadvantages. Some examples include:
Corporation
Advantages:
- Protects owners from personal liability
- Relatively easy to raise capital by selling stocks
- Pass-through tax benefits with S corporations
Disadvantages:
- Numerous record-keeping and reporting requirements
- Annual and ongoing fees
- Potential double taxation with C corporations
Partnership
Advantages:
- Partners share responsibility and financial burdens
- Pass-through tax treatment
- Ability to limit personal liability
Disadvantages:
- Potential liability for other partners’ actions
- High risk of interpersonal conflict
- Reduced profits due to sharing them with other partners
Limited Liability Company
Advantages:
- Personal assets are typically not at risk because of liability limits
- Pass-through tax benefits
- Fewer formalities versus a corporation
Disadvantages:
- LLC members usually pay self-employment tax
- LLC funds must be kept separate from personal funds
- Forms and filing fees
You may also simply wish to work as a sole proprietor. Regardless, we can review your business objectives, explain the options, and help you choose the right legal entity.
Registering Your Business
After determining which legal entity is best, it needs to be registered. Where and how you do so depends on the type of business you form.
- Sole proprietorships and general partnerships file in the county in which they are located.
- Limited partnerships file a Certificate of Limited Partnership with the New York Department of State.
- Corporations file a Certificate of Incorporation with the Department of State.
- Limited liability companies file Articles of Organization with the Department of State.
Drafting Governance Documents
These are documents that determine how exactly the company will be organized and run. This step can be thought of as an extension of the above. Governance documents protect the rights of owners and determine who makes major business decisions.
These are some documents your business may need, depending on what legal entity it is:
- Articles of incorporation
- Corporate bylaws and amendments
- Operating agreements
- Partnership agreements
- Stock purchase agreements
Addressing Tax Matters
Taxes are complicated and become even more so if you have employees. For instance, you will need to withhold employment taxes such as Social Security and Medicare. We can give you some general information about tax issues you might encounter in your business.
This advice will depend largely on the legal entity you’ve chosen. You will need to obtain a tax identification number from the IRS. You may also need to register with the state of New York.
Obtaining Insurance
We can discuss the various types of insurance your business may need. For example, you might need premises liability coverage. If you have a certain number of employees, you will need workers’ compensation insurance. If there are company vehicles, then automobile liability insurance is critical. Certain businesses require professional liability insurance.
We know the basics of which businesses need which kinds of insurance. Just ask our experienced New York business lawyer for assistance.
Drafting Contracts
Your business will form relationships with people inside and outside your organization. Effective and comprehensive business contracts are essential to protecting your legal rights and interests.
We can help you draft such contracts as:
- Manufacturing contracts
- Supplier and vendor contracts
- Bank loan and line of credit contracts
- Non-compete contracts
- Non-disclosure contracts
- Employment contracts
- Real estate purchase agreements
- Commercial property leasing agreements
- Intellectual property licensing contracts
Helping You Start and Run Your New York Business
The above are just some of the steps you will take to get your company off the ground. We can review your business and give you additional, personalized advice. And we can assist you with legal matters that will go beyond the formation of your company.
Talk to Rosenbaum & Taylor’s dedicated New York business lawyers today by calling (914) 326-2660.
