New York recognizes four types of business entities:
- Sole proprietorship, also known as a “DBA,” is the simplest business form to set up. It is registered at the county level. The prospective business owner must fill out a form and file it, with the required filing fee, with the County Clerk of the county wherein the business will have its principal offices.There is no separation between the business assets and the owner’s assets in this type of business.A sole proprietor may have employees, but may not share ownership of the business.
- Partnership is essentially a sole proprietorship with more than one owner. Partnerships are even easier than sole proprietorships to form, since there is no registration required; the partners must simply present to the public as partners. There are serious disadvantages to partnership under New York law; because of this, very few business partnerships exist anymore.
- Limited Liability entities (Limited Liability Company, or LLC, and Limited Liability Partnership, or LLP) are the new kids on the block. In existence in New York only since 1994, limited liability entities provide the advantages of the corporate veil (protection for personal assets) with the ease of management of a partnership or a sole proprietorship. They are the sexy business form these days, but they may not be the best form for your business.
- Corporations are the classic business form. Small businesses can elect pass-through taxation, which minimizes the double-whammy effect of corporate taxes on small businesses.
At Delain Law Office, we can help you determine which of these four entities is the best one for you and your business.
Tax ID Numbers
All businesses, including sole proprietors, should apply for an employer ID number, or EIN, through the Internal Revenue Service. If your business sells taxable goods and/or services, you will also need a sales tax number through the New York Department of Tax and Finance.
While a business owner’s Social Security number may be accepted as the business’s tax ID in some cases, we recommend that no one use their Social Security number as their business tax ID to minimize the possibility of identity theft.
For help setting your business up and getting it started, contact Delain Law Office, PLLC today.