LLCs vs. Corporations in New York About New York LLCs: Basic Overview In general, LLCs are the more modern and flexible form of business. They have fewer requirements than corporations, meaning there's no need for corporate minutes, bylaws, annual shareholders meetings, etc. Plus, unlike S Corporations, non-resident aliens can be active owners of an LLC. Also, while LLCs offer the same liability protection as corporations, they are taxed as sole proprietorships or partnerships, which eliminates any corporate income tax. Until June 2007, we recommended that our clients form LLCs, and most did. However, now that New York has enacted penalties for non-compliance with its ridiculous legal publication requirement, most of our clients are choosing to form "S" corporations. In a nutshell, New York law requires all LLCs to publish legal notices in two (2) newspapers, once a week, for a period of six (6) weeks. This adds an extra cost of between $299 and $1299. Publication is not required for corporations. *Our Recommendation* Unless you (1) feel strongly about the flexibility of LLCs, (2) are not limited by your budget, or (3) have any non-resident aliens as active owners, you might be better off with an S Corporation as described below. As always, check with a lawyer before making your final decision.  About New York corporations: Basic Overview In general, corporations are the more traditional form of business. Many investors would still rather invest in a corporation. However, corporations are subject to more regulation than LLCs, meaning they have to deal with formalities such as corporate minutes, bylaws, and annual shareholders meetings. Plus, unless a Subchapter "S" election is made, corporations are subject to a double tax. Making a "Sub S" election avoids taxes at the corporate level, so earnings are taxed only once at the personal level. Thus, income and losses are "passed-through" to the shareholders, thereby resulting in considerable tax savings. However, be aware that no shareholder of an S Corp can be a non-resident alien. There are also restrictions on the number of shareholders in an "S" Corp. *Our Recommendation* S Corps, at least in New York, are a much lower-cost alternative to LLCs, solely due to the LLC publishing requirement as described above. If your up-front funds are limited, an S Corp may be your best bet. As always, check with a lawyer before making your final decision.  Next step: View the costs & options -OR- Form a NY corporation   |   Form a NY LLC

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