Which Entity Should You Choose When Starting A Small Business?

//Which Entity Should You Choose When Starting A Small Business?

Which Entity Should You Choose When Starting A Small Business?

Which Entity Should You Choose When Starting A Small Business by Deborah Kaminetzky

Choosing a Business Entity – Which One is Right for Your Business?

Now that you have decided to launch a business, you need to decide which business entity is right for you. I’ll explain the differences between sole proprietorship, partnerships, corporations and limited partnerships. I cannot stress enough the importance of having a discussion with your CPA or tax adviser as to how each entity may affect you and taking that into consideration when making a decision, especially now with the prospect of new tax code legislation.

The simplest entity in New York is that of the sole proprietor – all you have to do is open one up in your own name, no paperwork required. Should you want to open in a trade name, such as “Gidget’s Gadgets,” you will need to file paperwork with the county where the business is located, usually at the county clerk’s office. The largest downside to a sole proprietorship is that of total personal liability, and when you pass away, the business dies with you.

Partnerships are another simple way to set up a business. They have the advantage of not having the expense of a corporation, but the disadvantage of personal liability for the partners and ending when a partner passes away or goes bankrupt.

Corporations cost money to create and have very specific requirements even after filing. Getting the so called “corporate book” is not the end of the care and feeding of a corporation. By-laws need to be drafted, and there should be an annual shareholder meeting in order to truly be able to take advantage of the protections a corporation offers. One of the biggest advantages of incorporating is the lack of personal liability. Another is that the entity does not die with you and can be sold or taken over and kept going.

Most corporations are taxed at the corporate level, and then the shareholders get taxed again. Should your business meet the requirements, it may be able to elect “Sub-chapter S” status with the IRS. The advantage to this is that the corporation only gets taxed once as a schedule on your personal tax return. A CPA will be able to advise as to to whether this makes sense for you. Professionals such as doctors, lawyers and accountants have the ability to form a “professional corporation” designated by the letters P.C.

Limited partnerships are similar to partnerships except that some of the partners are able to limit their liability, much like in a corporation.

Speaking to both a CPA as well as an attorney knowledgeable about your type of business and business law will be helpful in making a decision.

Deborah E. Kaminetzky

 

Deborah E. Kaminetzky, Esq.
Kaminetzky Law & Mediation, P.C.
132 Spruce Street
Cedarhurst, New York 11516
Phone: 516.374.0074

By | 2018-10-15T15:59:38+00:00 February 23rd, 2017|Small Business|Comments Off on Which Entity Should You Choose When Starting A Small Business?

About the Author:

Deborah E. Kaminetzky is the founding member of Kaminetzky Law & Mediation, P.C. located in Cedarhurst and Garden City, New York. Prior to starting the firm Deborah worked at a Long Island firm where she learned the practice of Matrimonial and Family law and Estate Planning. Deborah has also worked at the New York City Department of Consumer Affairs where she was responsible for prosecuting unlicensed home improvement contractors and negotiating settlements for consumers. Prior to practicing law, Ms. Kaminetzky was the president of a commercial property management corporation in the New York Metro area. Ms. Kaminetzky is a member of the American Bar Association (General Practice, Solo and Small firm Division and Law Practice Management Sections), National Association of Divorce Professionals, New York State Council on Divorce Mediation, Family and Divorce Mediation Council of Greater New York, New York State Bar Association (Business Law, Estate, Family Law, ADR and General Practice Sections), Nassau County Bar Association (where she serves as Vice Chair of the General, Solo and Practice Management Committee, and is active in the Community Relations and Education Committee) and The Nassau County Women’s Bar Association. Ms. Kaminetzky was appointed to the Committee on Law Practice Management of the New York State Bar Association in 2015 and has been a frequent speaker and author of articles for their journal. Ms. Kaminetzky serves on the Board of Directors of the Yashar Attorney and Judges Chapter of Hadassah as a their Treasurer, and was their Woman of the Year 2012. Deborah graduated from New York Law School in 1991 and the University of Michigan, Ann Arbor in 1986. Ms. Kaminetzky was admitted to the First Department in 1991 and the United States Supreme Court Bar in February of 2015. Deborah is on the Matrimonial fee dispute arbitration panel for Nassau County. She expanded her alternative dispute resolution practice by completing a Mediation certificate program in December of 2013, an advanced Mediation certificate program in 2015 and most recently a Divorce Mediation certificate in early 2016 from The New York Peace Institute. Ms. Kaminetzky has spoken to various groups on topics including matrimonial law, technology and social media use, and disaster preparedness for business including cybersecurity.