For businesses seeking identification as separate legal entities, New York law allows them to undergo the process of incorporation. When an incorporated business acts, whether it is to buy and sell property, agree to contracts or exercise legal rights, the process is then attributable to the business itself and not its owners. A business looking to incorporate in New York must file with the Secretary of State in accordance with established guidelines.
Benefits of Incorporation in New York
An incorporated business enjoys certain advantages, the most important being a limit of liability for the shareholders. The most shareholders can lose is the amount they invest in the business. If the business had remained a personal asset of the owners, they could run the risk of losing their personal property to pay for the company's financial liabilities in case of default. A corporation might also find it easier to finance itself through loans, allowing creditors in the Chappaqua area to evaluate their investment by assessing the corporation rather than the individual credit-worthiness of its owners. Finally, a corporation's ownership stake is divided into equal slices or "shares" of stock, which make investments in the business much easier to transfer.
Costs of Incorporation
Along with a possible fee to apply for incorporation in New York, there are other costs that corporations incur. The most important is that a corporation is taxed as its own entity. Disbursements to the owners of the corporation are also taxed as individual income, so this means earnings might be taxed twice. But this double taxation can be avoided with proper planning and help from a local Chappaqua lawyer.