Discover the advantages of forming a New York LLC, a strategic choice offering unique benefits such as personal asset protection and flexible tax options, and delve deeper to understand how it can be a game-changer for your business endeavors.
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If you’re considering forming a business in the Empire State, odds are you’re considering the drawbacks and benefits of an LLC in New York. You’ve probably got a lot of questions. Is an LLC worth the effort? Would a different business structure be better? Or should you pick a different state?
In this guide, we’ll help you answer some of those questions by discussing the benefits of a New York LLC. From tax flexibility to asset protection and more, LLCs present a lot of advantages to New York small business owners.
A key benefit of an LLC in New York is that this business structure offers tax advantages: pass-through taxation and flexibility.
By default, a limited liability company is a pass-through entity for federal income tax purposes (see pass-through definition). That means the LLC itself doesn’t pay taxes; the tax burden “passes through” to the members. Each member reports their share of the business profits on their personal tax returns and pays whatever’s due. It’s almost identical to taxation for a sole proprietor (for a single-member LLC) or general partnership (for multi-member LLCs). See multi-member LLCs definition.
This structure also avoids the “double taxation” of a corporation. In business corporations, the business pays taxes on its profits at the corporate level before making distributions to its shareholders; then the individual shareholders pay taxes on their share of the profits. So the same money is taxed twice — and then the business pays the New York franchise tax, too.
Even though corporations are subject to double taxation, it can sometimes be more advantageous to be taxed like a What is a C corporation?, especially for certain larger LLCs. Smaller LLCs might gain a tax advantage by being taxed as an S corporation (please see our What is an S Corp? page) because S corporations also have pass-through taxation, but they also have the potential to save money on the taxes they pay for Social Security and Medicare.
The luxury of a New York LLC is that you can keep your default tax structure or elect C corp status or S corp status (as long as you qualify). You should also make sure you detail your choice in your LLC’s operating agreement. (For more information, please see our operating agreement definition page.) If you’re not sure which structure will be most advantageous for you, we highly recommend consulting with a business attorney or licensed accountant. Read the franchise tax definition for more.
One of the biggest benefits of an LLC is personal asset protection. If you operated as an unregistered business, such as a sole proprietorship or general partnership, your business would be legally indistinguishable from you as a person. But an LLC is a separate legal entity from its owner. The LLC is responsible for its own debts and liabilities.
If an LLC gets into legal or financial trouble, creditors and plaintiffs can only come after the LLC’s business assets. They usually can’t seize your personal assets, such as your car, personal savings account, or home. In New York, business litigation isn’t uncommon, so limited personal liability is a crucial advantage. It’s one of the primary reasons a lot of small business owners decide they need an LLC.
An LLC’s personal asset protection is only valid if the LLC operates compliantly. If you fail to meet state statutes, such as maintaining any applicable business licenses, filing biennial reports, or something similar, you might lose your corporate veil.
A court might also rule to pierce your corporate veil if you mingle your business bank account with your personal funds or commit fraud. But if you stay compliant and conduct legal business dealings, it’s hard to lose your limited liability protection.
New York small businesses have access to a wealth of resources: the Small Business Administration, Empire State Development, New York City Small Business Services, and many more. These organizations offer training and workshops, networking, contracting opportunities, and more.
If you need startup capital, there are opportunities to get it. The New York Small Business Credit Initiative received over $500 million in federal funding to assist small businesses. Plus, you can consult with New York’s Small Business Development Center to find additional grants and financing. Venture capital firms also have a strong presence in the state, especially in New York City.
New York state fosters a welcoming environment for businesses statewide. Thanks to its strategic location in the Northeast — and proximity to several key cities in Canada — New York boasts a unique blend of business industries. Plus, top universities like Cornell, Syracuse, and more keep top talent accessible to state employers. The New York Power Authority also supports minority-owned and veteran-owned businesses.
And, of course, New York City constantly propels tourism, industry, and international trade. With such a vibrant, thriving environment, it’s no surprise that New York is home to over 2.3 million small businesses.
Related Articles:
Tax Benefits of an LLC: How It Can Benefit Your Business
How Do LLC Protections in New York Differ from Other States?
Starting a New York LLC is an exciting but crucial process — let us help you get it right. Whether you need help forming your LLC, a registered agent for service of process, worry-free annual compliance, or anything in between, we have your back. Let us handle the red tape so you can focus on what matters: your business.
What’s the advantage to forming an LLC in New York?
LLCs present a lot of benefits, but the most important one is arguably personal asset protection. By forming an LLC, you have the flexible ownership and management of a sole proprietorship or general partnership. But you also enjoy limited personal liability protection.
Other advantages include a flexible tax structure, access to a competitive business environment, and easy maintenance.
Do LLCs pay taxes in New York?
That depends on your LLC’s tax structure. If you’re taxed as a pass-through entity, your members will pay taxes. But if you’re taxed as a corporation, the LLC will pay income taxes and franchise taxes.
No matter what your tax structure is, you’ll very likely pay state sales taxes. There’s also a good chance you’ll be subject to some miscellaneous industry or local taxes. We highly recommend consulting with a licensed New York accountant to discuss your taxes.
What LLC filing fees should I expect?
New York falls in the middle of the road for statutory filing fees — they’re not cheap, but some states charge more. (Please see more on our New York LLC costs page). Your Articles of Organization will cost $205 to file. Thankfully, the annual filing fees are minimal. They’re not even annual. New York’s Biennial Statement (the state equivalent of an annual report) costs just $9 every other year.
File with ZenBusiness to keep your LLC filing as cheap as possible.
What can I do with an LLC in New York?
You can use an LLC to accomplish almost any business purpose that’s permissible by law. That said, if you’re in a regulated industry that requires a professional license, you’ll need to form a professional limited liability company instead.
How do I know I’m ready for an LLC?
Even though these benefits make a powerful case for why you might form an LLC, you still might find yourself wondering if you’re ready. Ultimately, you have to make that call. But from a paperwork perspective, you’re ready to start an LLC once you have a name picked out and a registered agent appointed. Once you begin, our LLC business checklist can help you stay on track.
Written by Team ZenBusiness
ZenBusiness has helped people start, run, and grow over 700,000 dream companies. The editorial team at ZenBusiness has over 20 years of collective small business publishing experience and is composed of business formation experts who are dedicated to empowering and educating entrepreneurs about owning a company.
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