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Are you looking to learn how to form an S Corporation in New York? If so, the experts at John F. Dennehy CPA offer several decades of experience helping business owners make the most intelligible decision. We will work closely with you to help you understand all of your options, and we'll provide tailored suggestions based on your business.
And choosing the right business structure is of the utmost importance that can have long-term implications. When deciding on a legal structure for a company, many business owners get stuck deciding between filing a New York S corporation vs a limited liability company (LLC).
Both options offer friendly tax treatment and limited liability, but there are some slight differences that everyone should be aware of. Below, we’ve put together some frequently asked questions and information regarding these two business entities.
Any business can apply to become a corporation by filing a certificate of incorporation with New York’s Department of State. This is done by faxing Form CT-6 to 518-435-8605 (with a copy of the federal approval letter). Once the certificate is completed and the corporation is created, you will choose the S corporation status with the state and federal tax authorities (Form CT-3-S).
You can learn all of the steps involved in forming a C Corporation in New York.
Contact the New York’s Department of States to file articles of organization, which is similar to a certificate of incorporation. Once completed, the articles of the organization can be submitted online via the e-filing portal or as a PDF Form. The documents can also be sent through the mail to the Department of State, but the wait time for completion is longer.
An S corporation is a business that has elected to have a special tax treatment with the New York State tax authorities. Aside from that, it runs like any regular corporation (a legal entity formed by one or multiple people). Any invoices, contracts, or business activities will be under the entity rather than the owners of the corporation.
An LLC is a business entity formed by either an individual, multiple people, other businesses, or any combination of those three. Similar to an S corporation, the owners are not personally responsible for any business debts and liabilities associated with the company. Instead, the corporation itself is responsible for those debts. It should also be noted that both entities help owners avoid paying personal and corporate taxes associated with the corporation.
In an S corporation, owners receive annual salaries plus dividends from any other profits the corporation earns. In an LLC, the corporation’s profits pass through the establishment itself. This means that all expenses and generated income from the corporation get reported on the personal income tax return of the LLC operator.
Learn more about the differences between an S Corporation vs LLC.
Aside from how owners avoid taxes associated with the corporation, both entities can potentially lower their tax bill by strategically deducting for travel expenses, uniforms, phone bills, computers, promotions, car expenses, gifts, advertising, and health care premiums.
An S corporation can have up to 100 shareholders and all of them must be individuals (some exceptions do apply). As for an LLC, there is no limit on the number of members and business entities that can be associated with it.
Excluding legal fees, to form an S corporation in New York costs $195 while an LLC costs about $1500 to form. The difference in cost stems from LLCs obligation to print their formation in newspapers for their respective county. In New York, it cost roughly $1200 to be printed in the newspaper.
A shareholder may deduct his/her share of the losses associated with the S corporation. However, there are certain limits. In general, S corporations allow fewer loss deductions when compared to LLCs.
No. All shares must have the same rights to distributions, profits, and liquidation of assets. For example, a shareholder who posses 50% of the shares can only receive 50% of the distributions associated with the S corporation.
Deciding whether to form an S corporation in New York is a major decision and shouldn't be taken lightly. Fortunately, the experts at John F Dennehy CPA can help. We will get to know you, your needs, and your future aspirations for your business.
Then we can suggest the best type of business entity to help you achieve those goals. Whether you need us to do aloof the filings or show you to form an S corporation in New York, we offer the flexibility and versatility to meet your needs.
Contact John F. Dennehy CPA today.
We at John F. Dennehy CPA are a team of certified public accountants who service clients throughout Long Island. The services that we provide are comprehensive, and we can resolve multiple accounting needs for a client.