For businesses seeking recognition as separate legal entities, New York law allows them to undergo the process of incorporation. An incorporated business acts in its own name, whether buying and selling property, assenting to contracts or exercising legal rights. To incorporate in New York, a business must file with the Secretary of State in compliance with particular guidelines.
Benefits of Incorporation in New York
A corporation enjoys benefits that unincorporated companies do not. Primarily, it cannot be held accountable for an amount of debt greater than the value of the assets that the owners have invested in it. 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. A corporation may also find it easier to finance itself through loans, allowing creditors in the New Paltz area to evaluate their investment by assessing the corporation rather than the individual credit-worthiness of its owners. Lastly, the ownership stake in a corporation can be apportioned into uniform slices, known as "shares" of stock. This makes it possible to sell ownership investments in more manageable slices.
Costs of Incorporation
Along with a possible fee to file 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. The individual incomes of owners who are paid disbursements from the corporation's earnings are still taxed as well. This is called double taxation, but it can be avoided with proper planning and assistance from a local New Paltz lawyer.