New York LLC Benefits

Because of the limited liability, confidentiality, asset protection and favorable taxation rules, New York is considered to be an ideal place for small businesses to establish an LLC. At the same time, they enjoy flexibility in regard to adding new members, how distributions are made, and how they operate. In this situation, your small business can enjoy the benefits of forming a partnership, combined with being shielded from liability, just as a corporation would be.

Taxing options and strategies

A New York LLC can choose to be taxed on a “standard corporation” basis and pay taxes as a company first, followed by the members paying for their individual distributions. If it elects to be taxed as a partnership, there is no tax at the company level, unless a franchise fee is owed, and regardless of the method chosen, this can amount to significant savings.

Forming an LLC

To begin, a detailed Operating Agreement must be compiled outlining the distribution methods, capitalization, the benefits and rights the members (including the managing member), and any other issues that are needed to properly run the LLC in the state. This agreement is similar to the well-written and strictly observed bylaws of a corporation, and it helps to ensure that the LLC is protected legally.

Other benefits

Note also that a New York LLC is not subject to the many stringent rules that regulate C and S corporations, and is usually much easier to form and operate. For example, it can have just one member, or as many members as the company wants to have, and the types of stock are unlimited as well. However, the business must choose a managing member to lead the organization and be responsible for its operations.

The company’s profits and losses are reflected in the members’ individual tax returns, and there is no taxation of the LLC itself. The LLC’s net profit is not regarded as income the members have earned, and they are not required to pay self-employment tax.