Rochester Legal: Forming an S Corporation and an LLC in New ...

??????So you want to start a business.? One decsion you will have to make is whether to create an entity for this new business.? As important is deciding what type of entity you should form,? Most small business owners end up deciding between a New York S corporation and a New York limited liability company (LLC) when choosing a formal legal structure for their New York business.? Both entities offer limited liability and a start-up friendly tax treatment. So, which entity is the best for one for your?enterprise and individual circumstances?
???? In the next few blog entries we will answer many of the questions you may have when considering forming a business entity.
???? An S corporation is a (regular) business corporation that elected a special tax treatment with the federal tax authorities and/or the New York State tax authorities.? Otherwise, an S corporation?s characteristics are just like a regular business corporation, which means that it is a legal entity that can be formed by one or more persons.? Once a corporation is formed, the S corporation (not its owners in their personal capacity) will enter into all contracts, issue all invoices and undertake all business activities.? Remember too that professionals can only form a professional corporation.
???? On the other hand, a limited liability company (LLC) is a business entity that can be formed by one or more persons or other business entities.? Once an LLC is formed, the LLC (not its owners in their personal capacity) will enter into all contracts, issue all invoices and undertake all business activities.? As with professionals and corporations, professionals can only form a professional limited liability company.

FAQ:
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How do I form an S Corporation?
You start by forming a regular business corporation.
The formation of a corporation requires the filing of a ?certificate of incorporation? with New York?s Department of States.
Once the corporation is in existence, you will have to elect S corporation status with the federal and state tax authorities.?
How do I form an LLC?
The formation of an LLC requires the filing of ?articles of organization? with New York?s Department of State.

Who can form an S Corporation?
Only individual U.S. citizens or U.S. residents can form an S corporation.
Who can form an LLC?
Any person or business entity.

How many Shareholders can an S Corporation Have?
An S corporation can only have a maximum of 100 shareholders all of which have to be individuals (some exceptions apply).
How many Members can an LLC have?
An LLC can have an unlimited number of members.

Who are the Owners of an S Corporation?
The owners of an S corporation are called shareholders.? The corporation issues share certificates to the shareholders in exchange for something of value, like cash, services or property.
Who are the Owners of an LLC?
The owners of an LLC are called members.? You become a member by contributing something of value (cash, services, property) to the LLC and receiving a membership interest in return.

How much does it cost to form an S Corporation?
It costs about $235 to form a corporation in New York, excluding legal fees.
How much does it cost to form an LLC?
It costs about $800 in fees to form a limited liability company in New York, excluding legal fees.? The main costs of formation stem from the fact that limited liability companies are required to publish their formation in two newspapers.? Depending on your location, this publication requirement can be quite costly.? The estimated cost of formation above is based on Monroe County?s approved rates for newspapers newspapers (about $500); it is less in other counties and much more (up to $1000.00) in the New York City Area.

How long does it take to form an S Corporation?
For about $200 in fees, your corporation will be in existence within 24 hours.? However, you normally have to wait a couple of days to receive the necessary documents in the mail to prove that your corporation has been formed.? This may be necessary for opening a bank account.
How long does it take to form an LLC?
You can form an LLC within 24 hours.? However, you normally have to wait a couple of days to receive the necessary documents in the mail to prove that your LLC has been formed.? This may be necessary for opening a bank account.? Many banks will also require you to show an operating agreement (see discussion below) before they will open an account for your LLC.? The publication requirement has to be completed within 120 days of formation. Notwithstanding, you can start doing business with your LLC as soon as it is born.? If you fail to fulfill the publication requirement, your business loses the authority to conduct business in New York with the expiration of the 120-day period.

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