NOTE: The following information applies only to New York State. This information was posted in July, 2008. We will periodically update this information, although we undertake no obligation to do so. When we up-date the information we will make a note of it here.

Q. I want to start my own business. What should I do?
A. There are two broad categories of issues you should address: The operations and the legalities. Operations involve the business itself: what you're going to sell, suppliers, advertising, etc. Legalities involve what you must or should do to run your business legally and with a minimum of liability. The following FAQs will discuss only the legalities.

Much of the information provided below can be found online at www.dos.state.ny.us/corp/busguide.htm, and more specific information about various business entities can be found at www.dos.state.ny.us/corp/faq.html.

Q. What is a corporation?
A. A corporation is an entity -- a "person" so to speak -- that is recognized by law as separate and distinct from the owner of a business. Like a person, a corporation is born, grows, and has rights and obligations. It can own a car, have a bank account, sign contracts, and sue - or be sued. A corporation is formed when a Certificate of Incorporation is submitted to the New York Secretary of State's office.

Q. Why should I incorporate?
A. If you run your business through a corporation that is properly organized and maintained, and the corporation is sued and is found liable, the person suing can only recover his damages against the corporation's assets. The owner's personal assets - his or her bank account, car, home, etc - would generally not be at risk. This is frequently referred to as "limiting liability".

Q. What is an LLC?
A. A limited liability company - or LLC - is similar in many respects to a corporation. It is a separate legal person, and serves to limit the owner's liability. It is different from a corporation in the way it is organized, and there are differences in the ways income from a corporation and income from an LLC are taxed. An LLC is formed when Articles of Organization are submitted to the New York Secretary of State's office.

Q. How can I decide whether to use a corporation or a limited liability company?
A. You should talk to a lawyer or an accountant, or both. You can also find more information at the "Businesses" page of the Internal Revenue Service's website (http://www.irs.gov ), especially at "Business Structures".

Q. How do I form a corporation?
A. Detailed information and instructions are available from the Division of Corporations of the New York Department of State, at its website: www.dos.state.ny.us/corp.busguide.htm. There is also a fillable PDF form at www.dos.state.ny.us/corp/pdfs/dos/239.pdf.

Q. What is an "S" corporation?
A. See the last Question below.

Q. What is the fee for filing a Certificate of Incorporation?
A. The base filing fee is $125.00. There is an additional fee that is determined by the number of shares of stock the corporation is authorized to issue. Many small business corporations are authorized to issue 200 shares, which is the maximum number of shares that can be authorized for the minimum tax ($10.00). It's also a good idea to request a certified copy of the filed document, so you have proof that it was filed. That costs another $10. In addition, if there is an urgent need to have the Certificate of Incorporation filed quickly, different levels of rush service are available for different fees.

Q. How do I form an LLC?
A. Again, information and instructions are available: www.dos.state.ny.us/corp/llccorp.html#artorg

Q. What is the filing fee for an LLC?
A. Two hundred dollars ($200). Again, requesting a certified copy is suggested. In addition, if there is an urgent need to have the Articles of Organization filed quickly, different levels of expedited service are available for different fees. Note, however, that the law also requires publication of a notice regarding the formation of an LLC in two newspapers, and other procedural steps.

Q. How do I submit my document to the Division of Corporations?
A. The completed and signed document may be mailed or faxed to the Division. The document must be accompanied by payment of the fees. A good way of figuring out the total fees - filing fee, getting a certified copy, etc - is to review the Credit Card/Debit Card authorization form discussed below. If submitted by mail, include a check and mail the materials to:

Division of Corporations
One Commerce Plaza
99 Washington Ave.
Albany, NY 12231

If submitted by fax, include a Credit Card/Debit Card authorization form (available at http://www.dos.state.ny.us/corp/creditcard.html) for the payment of fees, and fax to 518-474-1418.

Q. Where can I compare the procedures for filing a Certificate of Incorporation with filing Articles of organization?
A. Go to www.dos.state.ny.us/corp/filing.html.

Q. Do I need a Tax ID Number?
A. Yes. The Internal Revenue Service (IRS) assigns this number, which is also sometimes called the Employer ID Number or the EIN. The form and instructions for applying for an ID Number are available at www.irs.gov/. A fillable PDF is available at http://www.irs.gov/pub/irs-pdf/fss4.pdf?portlet=3.

Q. Where do I get information about New York State taxes?
A. Contact the Department of Taxation and Finance, either by mail at:

Dept. of Tax and Finance
Taxpayer Assistance Bureau
Harriman Campus
Albany, NY 12227

or at http://www.tax.state.ny.us/sbc or at http://www.tax.state.ny.us/nyshome/how_to_reach.htm.

Q. Where do I get information about Federal taxes?
A. Contact the IRS, either by mail at: internal Revenue Service, Andover, MA 05501, or at www.irs.gov/business/index.html . See also the IRS's Small Business and Self-Employed One-Step Resource (www.irs.gov/business/small/index.html).

Q. What is an "S" corporation?
A. An "S" corporation is a corporation that has elected to be treated, for tax purposes, like a partnership. That means that any income that comes to the corporation "flows through" the corporation right to the shareholder; there is no income tax paid by the corporation, only by the shareholder.

In New York, a corporation that wants to be an "S" corporation must file both the Federal S Election form (available at http://www.irs.gov/pub/irs-pdf/f2553.pdf) and the New York State S Election form (available at http://www.tax.state.ny.us/pdf/2007/fillin/corp/ct6_707_fill_in.pdf). There is no filing fee for either the Federal or the State S Election, but both forms must be filed by the deadlines specified in the instructions for each form.

This FAQ article was written by Tom Farrell, a lawyer with a business-oriented practice, who can be reached at www.tmflawoffices.com, or by email at tfarrell@tmflawoffices.com.

NOTE: This article is intended to convey general information only. The presentation of this information should not be construed to be formal legal advice nor the formation of an attorney-client relationship. Consult an attorney for advice regarding your particular situation.