Various legal structures for NYC or NJ: Corporation, LLC, Partnership.

The LLC is a relatively new type of hybrid business structure that is now permissible in New York and New Jersey. It is designed to provide the limited liability features of a corporation and the tax efficiencies and operational flexibility of a partnership.

The owners are members, and the duration of the LLC is usually determined when the organization papers are filed. The time limit can be continued if desired by a vote of the members at the time of expiration.

It is highly recommended that an LLC with one or more partners contain an operating agreement. In an LLC, members are owners of an LLC. This is different then a corporation where shareholders own shares of the corporation. An LLC is managed by limited and managing members as opposed to corporations which consist of Shareholders of a corporation, and are orchestrated by the directors/officers of the company.

The Operating Agreement of an LLC is the document most important to its success because it determines, defines, and apportions the rights of the members. Because the various LLC statutes offer so much flexibility, and the default statutory rules do not fit most LLC’s needs, Operating Agreements must be customized through much discussion and agreement between the prospective members, and the careful drafting of an attorney.

Various states may have different requirement regarding the formation of a LLC, corporation or S-corp. For instance, New York has an additional publishing requirement while New Jersey does not. Consult with an attorney to find the regulations and statues that apply to your state.

Depending upon the city where the LLC is operating, a filing with the city may also be required.  An S corporation is a corporation that elects to be taxed under Subchapter S of Chapter 1 of the Internal Revenue Code of the IRS. The formation typically requires a state filing, obtaining a Federal Tax ID and an S election.  The S corporation election must typically be made by the fifteenth day of the third month of the tax year for which the election is intended to be effective, or at any time during the year immediately preceding the tax year. Some states such as New York and New Jersey require a separate state-level S election in order for the corporation to be treated, for state tax purposes, as an S corporation.

It is recommended that you consult attorney and accountant in regards to the entity that suits your business or profession. Choosing the right structure may help limit individual liability, and provide substantial tax savings.