How do I start an S-Corp/LLC in NYC?
April 13, 2009 8:21 PM Subscribe
I have to start up an LLC or S-Corp. How do I begin this process? Also, if you have experience with a good accountant in NYC who is familiar with this process, care to pass a recommendation?
I freelance in NYC for two cable networks under the MTV umbrella. MTV has just implemented a nine month work limit for freelancers. Once nine months is reached, three months time must pass before being hired again.
In order for me to get around this I need to start an LLC or S-Corp, so I can bill them as a company. So I ask:
1) What are the tax implications and associated costs in NYC to do this?
2) Can you recommend an accountant to help me along?
Thanks!
I freelance in NYC for two cable networks under the MTV umbrella. MTV has just implemented a nine month work limit for freelancers. Once nine months is reached, three months time must pass before being hired again.
In order for me to get around this I need to start an LLC or S-Corp, so I can bill them as a company. So I ask:
1) What are the tax implications and associated costs in NYC to do this?
2) Can you recommend an accountant to help me along?
Thanks!
The basic idea of both of these is that for tax purposes the company doesnt really exist - you still pay taxes on what the company earns, this is what accountants mean when they say the income "flows through" to you.
For liability purposes the companies definitely exist - assuming modest diligence. That is, if I sue helos410 LLC I can only access the assets of the LLC, not go after you personally. The diligence comes mainly in having a real separation between you and the company - you have one bank account and the company has a second and you dont pay your own expenses out of the company til. And more to the point, for MTV's purposes, the company really exists. I assume MTV is doing this to avoid any possibility of a permanent freelancer being able to make a claim of some sort on the company, but I could be off base here.
A big convenience comes if you ever want to distribute portions of you company (say to a valued employee some day) you just sell them shares or units of the company.
The extra expenses are: annual filing fees, say $300, extra work for your accountant at the end of the year, the cost of running two bank accounts.
If you pay your own health care you may not be able to deduct it anymore. Yay! Ask the accountant. Also ask the accountant about self employment taxes.
Dont start thinking you can deduct your home office - its a big red flag.
My accountant is good: Mark Avrutine of Trebatch Lictenstein and Avrutine at: 212 826 5050, but your situation is pretty vanilla and anyone should be able to handle it.
posted by shothotbot at 10:28 PM on April 13, 2009
For liability purposes the companies definitely exist - assuming modest diligence. That is, if I sue helos410 LLC I can only access the assets of the LLC, not go after you personally. The diligence comes mainly in having a real separation between you and the company - you have one bank account and the company has a second and you dont pay your own expenses out of the company til. And more to the point, for MTV's purposes, the company really exists. I assume MTV is doing this to avoid any possibility of a permanent freelancer being able to make a claim of some sort on the company, but I could be off base here.
A big convenience comes if you ever want to distribute portions of you company (say to a valued employee some day) you just sell them shares or units of the company.
The extra expenses are: annual filing fees, say $300, extra work for your accountant at the end of the year, the cost of running two bank accounts.
If you pay your own health care you may not be able to deduct it anymore. Yay! Ask the accountant. Also ask the accountant about self employment taxes.
Dont start thinking you can deduct your home office - its a big red flag.
My accountant is good: Mark Avrutine of Trebatch Lictenstein and Avrutine at: 212 826 5050, but your situation is pretty vanilla and anyone should be able to handle it.
posted by shothotbot at 10:28 PM on April 13, 2009
I don't have an accountant recommendation for you, and you definitely need one of those.
Also, I'm not in NY. But, I imagine this is pretty similar most places.
I founded a single-member LLC last year for basically the same reasons you are. A single-member LLC straddles the line between sole proprietor and LLC--it's a real LLC with all of the limited liability and official businessiness, but it doesn't need a federal employer number. In Washington state, it cost me about $200 and took about an hour online. I doubt it would be too different in NYC, although they might not have the online registration component. I have a yearly report to file, as well as some administrative fees to pay (I think they're around $100/year). Also remember that you'll need to keep your local/county business license up to date as well.
In terms of taxes, a single-member LLC is absolutely the easiest way to go. Since it's a single-member LLC, it gets taxed as a sole proprietorship. Here in Washington, this means that I pay some business/excise taxes on gross company income, and then the revenue of the company is simply treated as personal income on my personal taxes. The single-member LLC essentially passes through all of its revenues as my income, and is only taxed once (except for the excise tax, of course).
If you go with an S-corp, my understanding is that the corporation's income will be taxed at a corporate rate. Then, you'll pay yourself salary or dividends, and that will be taxed as your personal income. You basically get taxed twice--although I understand that if there's just one of you, it's easy to get around this.
One thing that's vital is that you really, really keep the company separate from your own assets. You need a separate bank account. You need to never use that corporate account for your own purposes. If you need the money for rent, you need to remove the money from the corporate account to your own account and then pay your rent--not write a corporate check to the landlord for rent. This may seem like a silly extra step, since it's all your money anyway--but, there's a big technical difference between paying yourself and paying your rent.
Personally, I'd say that if this company is just you, you'd probably be better served with the LLC. However, if the company is going to have some significant value beyond your presence, or you intend to bring in partners with non-equal equity, you may want to go with an s-corp to simplify the process of sharing it out.
posted by Netzapper at 10:49 PM on April 13, 2009
Also, I'm not in NY. But, I imagine this is pretty similar most places.
I founded a single-member LLC last year for basically the same reasons you are. A single-member LLC straddles the line between sole proprietor and LLC--it's a real LLC with all of the limited liability and official businessiness, but it doesn't need a federal employer number. In Washington state, it cost me about $200 and took about an hour online. I doubt it would be too different in NYC, although they might not have the online registration component. I have a yearly report to file, as well as some administrative fees to pay (I think they're around $100/year). Also remember that you'll need to keep your local/county business license up to date as well.
In terms of taxes, a single-member LLC is absolutely the easiest way to go. Since it's a single-member LLC, it gets taxed as a sole proprietorship. Here in Washington, this means that I pay some business/excise taxes on gross company income, and then the revenue of the company is simply treated as personal income on my personal taxes. The single-member LLC essentially passes through all of its revenues as my income, and is only taxed once (except for the excise tax, of course).
If you go with an S-corp, my understanding is that the corporation's income will be taxed at a corporate rate. Then, you'll pay yourself salary or dividends, and that will be taxed as your personal income. You basically get taxed twice--although I understand that if there's just one of you, it's easy to get around this.
One thing that's vital is that you really, really keep the company separate from your own assets. You need a separate bank account. You need to never use that corporate account for your own purposes. If you need the money for rent, you need to remove the money from the corporate account to your own account and then pay your rent--not write a corporate check to the landlord for rent. This may seem like a silly extra step, since it's all your money anyway--but, there's a big technical difference between paying yourself and paying your rent.
Personally, I'd say that if this company is just you, you'd probably be better served with the LLC. However, if the company is going to have some significant value beyond your presence, or you intend to bring in partners with non-equal equity, you may want to go with an s-corp to simplify the process of sharing it out.
posted by Netzapper at 10:49 PM on April 13, 2009
In most states, it is very easy to file for LLC or corporate status. New York seems to have some silly requirements, but it's relatively straightforward. You do this sort of thing through the Secretary of State's web site. Here are the steps associated with both options for you.
To form a Limited Liability Corporation:
(1) Pick a company name, and make sure that it is unique by searching the database.
(2) Fill out the 'Articles of Organization' [pdf] form. Mail, fax, or hand-deliver this form, along with the $200 Articles of Organization filing fee, to:
NYS Department of State
Division of Corporations
One Commerce Plaza
99 Washington Avenue
Albany, NY 12231
[map]
(3) That's pretty much it - you wait for the official Articles to be returned to you by the State via certified mail, at which time your LLC is effective. There is, however, one more step you have to follow through on within four months of the effective date: you must get in touch with your local county clerk and publish those Articles of Organization in two newspapers of her or his choosing; those newspapers will give you affidavits, and you must deliver those affidavits with a filled-out 'Certificate of Publication' [pdf] to the address above, along with the $50 fee. Yeah, this seems really silly and stupid to me (I have an LLC in Colorado; it cost me $50 and took five minutes online), but it's not so bad, I guess, since you have four months.
Now, an S-Corporation is formally the same as any other corporation; 'S-Corporation' is merely a tax filing status.
(1) As above, pick a company name, and make sure that it is unique by searching the database.
(2) Fill out and deliver the 'Articles of Incorporation' [pdf] with the fee of $125 to the address above.
Guess there's no silly newspaper-listing clause for corporations.
Hope some of this helps.
posted by koeselitz at 11:14 PM on April 13, 2009 [2 favorites]
To form a Limited Liability Corporation:
(1) Pick a company name, and make sure that it is unique by searching the database.
(2) Fill out the 'Articles of Organization' [pdf] form. Mail, fax, or hand-deliver this form, along with the $200 Articles of Organization filing fee, to:
NYS Department of State
Division of Corporations
One Commerce Plaza
99 Washington Avenue
Albany, NY 12231
[map]
(3) That's pretty much it - you wait for the official Articles to be returned to you by the State via certified mail, at which time your LLC is effective. There is, however, one more step you have to follow through on within four months of the effective date: you must get in touch with your local county clerk and publish those Articles of Organization in two newspapers of her or his choosing; those newspapers will give you affidavits, and you must deliver those affidavits with a filled-out 'Certificate of Publication' [pdf] to the address above, along with the $50 fee. Yeah, this seems really silly and stupid to me (I have an LLC in Colorado; it cost me $50 and took five minutes online), but it's not so bad, I guess, since you have four months.
Now, an S-Corporation is formally the same as any other corporation; 'S-Corporation' is merely a tax filing status.
(1) As above, pick a company name, and make sure that it is unique by searching the database.
(2) Fill out and deliver the 'Articles of Incorporation' [pdf] with the fee of $125 to the address above.
Guess there's no silly newspaper-listing clause for corporations.
Hope some of this helps.
posted by koeselitz at 11:14 PM on April 13, 2009 [2 favorites]
Be aware that starting an S-corp is like getting married. It's far easier and cheaper to start it than it is to shut it down (e.g., when its usefulness has passed).
posted by RichardS at 4:16 AM on April 14, 2009
posted by RichardS at 4:16 AM on April 14, 2009
NY has some serious publication fees for LLC. While the government only charges $50 for the pub, the newspapers charge a whole bunch. I worked for a place that formed LLCs and Corps online and we charged customers $1800 for publications in one of (probably whatever Manhatten is located in) the NY counties.
posted by sideshow at 12:11 PM on April 14, 2009
posted by sideshow at 12:11 PM on April 14, 2009
This thread is closed to new comments.
Probably best to wait till after tomorrow to try to get any tax accountant's attention though...
posted by nicwolff at 10:02 PM on April 13, 2009