For businesses seeking recognition 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, assent to contracts or exercise legal rights, the process is then attributable to the business itself and not its owners. A business seeking 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 benefits, 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 would run the risk of losing their personal property to pay for the company's financial liabilities in case of default. Also, creditors in the Chestnut Ridge area generally prefer to deal with corporations, since a loan is an investment more easily evaluated when the credit-worthiness of various owners is not an issue. Finally, the ownership of a corporation is divided into an abundance of equal portions or "shares" of stock. Without this mechanism, transferring ownership of a business would be impractical.
Costs of Incorporation
There are costs associated with incorporation, both short and long term. First, businesses in New York may be charged a fee to incorporate. Also, a corporation is taxed as its own entity. The individual incomes of the owners are still taxed also, and this can mean the same income is taxed twice, known as double taxation. With proper planning and assistance from a local Chestnut Ridge lawyer, you can avoid this disadvantage.