So you are starting a new business and are wondering: What are the legal requirements? What are the effects on your taxes? First of all, you must decide on what kind of ownership to have.
There are a few different types:
Sole proprietorship. This is when 1 person owns the business and can have any name you want, as long as the name is not a “trademark” owned by some other person or company.
Partnership. This is when 2 or more people co-own the business and usually share its expenses and profits.
Corporation. This is when 1 or more own “stock” in the company that does the business. Corporations have to be registered with the state and the IRS, but they have both advantages and disadvantages. One of the advantages is that the individual owners of the corporation (the stockholders) are protected from the liabilities or debts of the corporation.
Limited Liability Company (LLC). Formation of an LLC is a fairly recent phenomenon. An LLC is more a less a hybrid of a sole proprietorship and a corporation. It has some of the tax advantages of a sole proprietorship or a partnership and the protections of a corporation.
Which is right for you? Every situation is different and you should consult an attorney knowledgeable in this area to help you decide, and assist you in the registration and formation of which type of business organization you choose. The Law Office of Leslie A. Farber can help you do this.