1. Easy Set Up
Creating an LLC, like any other business, has initial fees, but the upkeep is low and will take significantly less from the owners in the beginning. Applicants must file Articles of Organization in order to form a New York LLC. These can be mailed, faxed, or emailed (which is recommended because the process is much faster this way). Filing through mail or fax can take up to 3-4 weeks. The filing fee in the state is $200. Applicants will obtain the EIN number of the firm once the state approves the Articles of Organization. We propose opening a business bank account with the EIN number and the approved Articles of Organization, which can be done at most banks. However, there is one more step to the LLC formation process.
In New York, LLCs are required to print in two newspapers for six weeks in a row. Within 120 days of acquiring the EIN number, the publication should be completed. This is where the majority of the expense of an LLC is spent. Print, as you may know, is no longer popular, which means it is also pricey. The paper will provide proof of publishing after the LLC has been published. The proof of publication, along with a publishing affidavit and a $50 filing fee, must be submitted to the New York Department of State.
Another cost to consider is the cost of establishing the Operating Agreement, which is required for the LLC to properly organize the business and establish ownership among members. The Operating Agreement between the members will be a legally binding contract. Overall, the setup may be more expensive, but an LLC is easier to establish in New York than a corporation.
2. Personal Protection
LLCs provide limited liability protection, which means that the company will separate your personal assets from the company’s assets. If the company is sued (which happens far more frequently than you might believe) or incurs debt, the claimant cannot seize your personal assets. There is no separation of business and personal assets in a sole proprietorship or partnership, which might have fatal effects.
It’s a sobering number, but 75% of new businesses fail. In the worst-case scenario, your ideal company fails, and you’re now buried in business debt. Naturally, you’d be concerned: “Will I lose my apartment?” Will they seize my savings? No and no with an LLC. Creditors cannot seize your personal assets to repay business obligations, so you can exhale a sigh of relief.
3. Pass Through Taxes
Who like paying taxes? If you choose a Corporation, there is a significant concern that you may encounter as a small business owner. Corporations are double-taxed, which means that the company pays taxes and then shareholders pay taxes on any profits distributed through dividends. An LLC is taxed in the same way as a sole proprietorship or partnership, which means that taxes are passed through the business and directly to you as personal income tax. This is a far more straightforward method for small businesses to manage and cut taxes.
4. Fewer Rules and Restrictions
LLCs, as opposed to corporations, are more adaptable. LLCs are not required to form a Board of Directors or appoint Corporate Officers. LLCs are exempt from the requirement to keep minutes and are less likely to encounter problems when transferring ownership. People frequently compare S-Corporations and LLCs, but LLCs have several advantages over S-Corporations as well. S-Corporations must follow the same structure as regular corporations, which includes appointing a Board of Directors, Officers, and keeping Minutes. An LLC can have an unlimited number of owners, and profit sharing is simpler. S-Corporations can only have 100 shareholders, and none of them can be other corporations, limited liability companies, or trusts.
5. Business Identity
Credibility is important when it comes to obtaining business credit or confirming your company’s legitimacy to potential clients and customers. Because your company is a different entity, you can set up a new credit profile. Do you have a terrible credit history? Not an issue. Your LLC’s credit is unrelated to your personal credit history.
The first step in developing your brand should be to secure a name, right? Even if you hold a DBA as a sole proprietor, you do not own the name. Creating an LLC gives you the right to that name on a state level, which means no other firm in New York can use it. This will be useful later on when you apply for trademarks. Having a well-established firm that uses the name or logo you want to trademark will help your case with the USPTO. Getting your business name today serves as a springboard for your future branding efforts.