Question

What are the advantages and disadvantages of each of the following business form: (1) sole proprietorship, (2) partnership and (3) a corporation.

Also, can you tell me specifically what New York requires to incorporate a business? Please provide a link to the state's information.

Answer 1

1. A sole proprietorship is a simple business structure in which one person is the owner and the operator of the business. This sole proprietor is responsible for all aspects of his business and reaps all profits of the business.

Advantages-

- Easy and inexpensive to form with few government regulations

- Complete control over the business

- Proprietor gets all the profits earned by the business

- No need to pay any special income taxes

Disadvantages

- Proprietor has to supply all the different talents needed to make the business a success

- If Proprietor dies, the business dissolves

- Will have to rely on own resources for financing

- If the company incurs a debt or suffers some sort of catastrophe, proprietor is personally liable

A partnership (also called as general partnership) is a business owned jointly by two or more people.

Advantages-

- It is relatively inexpensive to set up and subject to only few government regulations

- Partners pay personal income taxes on their share of profits and the partnership doesn’t pay any special taxes.

- Brings a diverse group of people together to share managerial responsibilities

- Partners can legally agree to allow the partnership to survive if one or more partners die.

- Makes financing much easier because the partnership can draw on the resources from a number of partners.

Disadvantages

- Shared decision making can sometimes result in disagreements.

- Even profits are subject to equal sharing

-Each partner is personally liable not only for his own actions but also for those of all his partners

Corporation is a form of a business operation that declares the business as a separate, legal entity which is guided by a group of officers known as the board of directors.

Advantages-

-Stockholders have limited liability.

- Corporations can raise the most amount of investment capital.

- Corporations have unlimited period of life.

- Ownership can be easily transferred.

-Corporations utilize the services of specialists

Disadvantages

- Corporations are generally taxed twice

- Corporations are liable to pay capital stock tax

- Starting a corporation is quite expensive.

-Corporations are closely regulated and monitored by government agencies.

2. To incorporate a business in New York, one needs to take the steps set forth below.

- Choose a Corporate Name

- File Certificate of Incorporation

- Appoint a Registered Agent

- Prepare Corporate Bylaws

- Appoint Directors and Hold First Board Meeting

- Issue stock to every shareholder

- File New York Biennial Statement

- Comply With Other Tax and Regulatory Requirements

One can visit https://www.dos.ny.gov › busguide
NYS Division of Corporations, State Records and UCC for more information