Businesses must be organized in accordance with accepted legal structures. There are four basic types of legal structures for small businesses in New York State:
If you don’t choose one of these specific types of organization, by law your business will be presumed to be a sole proprietorship if there is one owner, or a general partnership if there is more than one owner.
It is strongly recommended that when choosing the type of structure for your business, you consult with a lawyer, insurance broker and accountant about the advantages, disadvantages, and tax consequences of the structure you are considering.
A Sole Proprietorship (SP) is an individual owning and operating a business in his or her own name without partner(s). In a SP:
(“d/b/a”, or doing business as) by filing with the Clerk of the county(ies) in which the business operates.
There are two types of Partnerships:
A General Partnership (GP) is two or more individuals owning and operating a business together. In a GP:
A Limited Partnership (LP) is a business organization that has two levels of ownership: it must have at least one general partner and one limited partner. The LP’s affairs are conducted by the general partner(s), and the limited partners have no control over conduct of the business. In an LP:
GPs should be, and LPs must be, formed by an agreement between the partners covering what is expected from each partner in terms of the business. LPs must also file a Certificate of Limited Partnership, publish information about the initial Certificate of Limited Partnership in recognized newspapers in the State of New York, and file an Affidavit of Publication with the State of New York Department of State.
Both types of partnership must register an Assumed Name Certificate by filing with the Clerk of the county(ies) in which the business operates.
The income from both GPs and LPs is reported and taxed through the personal tax returns of the partners.
A Corporation is a legal entity. The corporation has rights, duties, and abilities similar to individuals. It is owned by one or more persons (individuals or another legal entity) called “shareholders”. The corporation:
A Limited Liability Company (“LLC”) is an unincorporated business organization that may be formed and/or owned by one or more individuals or legal entity(ies). Individuals and legal entities who are owners of an LLC are called “members”. An LLC:
For help with small businesses in New York City contact the Community Development Project at 212-298-3340 or email: CommunityDevProject@legal-aid.org.
The information in this document has been prepared by The Legal Aid Society for informational purposes only and is not legal advice. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. You should not act upon any information without retaining professional legal counsel.
Last Updated: 5 April 2023
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