US Indo Legal Services
A joint venture law firm promoted by Anand Ahuja Associates, New York, USA and Ram Kishan Associates, Indore, India

Phones- Off (USA)- 718-850-1952, 718-668-1258, 212-859-3538
  Phones- Off (India)-91-930-2103689, 91-731-3090201, 91-731-5049358

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Web- www.usindolegal.com

Tuesday 22nd November 2005 (last modified)

Antidumping, Immigration, legal matters relating to Exports, Imports, BPO, offshore BPO, Measure of Damages, DRT Solutions etc.

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Formation of Business Entities

By Anand Ahuja, Attorney at Law

[Anand Ahuja is licensed to practice law in the States of New York, Connecticut, Virginia, United States Court Of Appeals for Federal Circuit, and India. He works for Anand Ahuja Associates, Attorneys at Law and International Business Consultants, 67 Wall Street, Suite 2211, New York, NY 10005.
Phones:- (718) 850-1952, (212) 859-3538. E-Mail: anandesq@hotmail.com]

I. Introduction

The most frequently used business entities are the business corporation and the limited liability company. The formation of these entities governed by the statutory framework of the Business Corporation Law (hereinafter “BCL”) and the Limited Liability Law (hereinafter “LLC”), respectively. Although the distinctions between these two entities are varied, this article does not attempt to address those issues. The primary consideration in choosing whether to establish a business corporation or an LLC is the tax implications under the federal tax code. Therefore, it is advised that when deciding which entity to establish, the business situation be analyzed with a mindful eye on the tax implications.

II. Requirements for Business Corporations

Pursuant to Section 401 of the New York BCL, one or more natural persons who are at least 18 years old may act as incorporators of a corporation to be formed under Article 4 of the BCL.

Section 402 provides the contents required in a certificate of incorporation.

1. A certificate, entitled “Certificate of incorporation of ..... (name of corporation) under section 402 of the Business Corporation Law” shall be signed by each incorporator, with his name and address stated beneath or opposite his signature, acknowledged and delivered to the department of state. It shall set forth:

   1. the name of the corporation;

   2. the purposes for which it formed; an all purpose clause is permissible provided the corporation does not need regulatory consent; (for example, Section 405 of the BCL requires a certificate of incorporation that includes among its corporate purposes the establishment or operation of a day care center for children to have the approval of the State Department of Social Services endorsed on it);

   3. the county within the state, in which the office of the corporation is to be located;

   4. the aggregate number of shares which the corporation shall have the authority to issue;

   5. if the shares are to be divided into classes, the designation of each class and a statement of the relative rights, preferences and limitations of the shares of each class;

   6. if the shares of any preferred class are to be issued in series, the designation of each series and a statement of the variations in the relative rights, preferences and limitations as between series insofar as the same are to be fixed in the certificate of incorporation;

   7. a designation of the secretary of state as agent of the corporation upon whom process against it may be served and the post office address within or without this state to which the secretary of state shall mail a copy of any process against it served upon him;

   8. if the corporation is to have a registered agent, his name and address, within this state; and,

   9. the duration of the corporation if other than perpetual.

2. In addition, the certificate of incorporation may set forth a provision(s) limiting personal liability of directors.

The corporation’s existence begins upon filing of the certificate of incorporation with the Department of State or on a specific date, not to exceed ninety dates from the date of filing, set forth in the certificate of incorporation.

III. Requirements for Limited Liability Companies

A limited liability company may be formed by the filing of articles of organization pursuant to Article 2 of the LLC. The articles of organization must be signed by an organizer or organizers of the limited liability company.

Pursuant to Section 203 of the Limited Liability Company Law the articles of organization shall set forth:

1. the name of the limited liability company;

2. the county within this state in which the office of the limited liability company is to be located;

3. if the limited liability company is to have a specific date of dissolution, the latest date on which the limited liability company is to dissolve;

4. a designation of the secretary of state as agent of the limited liability company upon whom process against it may be served and the post office address within or without this state to which the secretary of state shall mail a copy of any process served upon him;

5. if the limited liability company is to have a registered agent, his name and address, within this state;

6. if all or specified members are to be liable in their capacity as members for all or specified debts, obligations or liabilities, a statement to such effect; and,

7. any other provisions, not inconsistent with law, that the members elect to include in the articles or organization.

IV. Requirements for A General Partnership

1. You must file an Assumed Name Certificate (following an agreement of the partners) with the clerk of county in which the business is conducted.

2. Personal liability is joint and individual for the general partners who are responsible for the obligations of the partnership.

3. The life-span of the business is for a designated period stipulated in the partnership agreement; or until dissolution event occurs.

4. For purposes of taxation a general partnership is not treated as a separate taxable entity; business income is taxed through each general partner's personal tax return.

V. Requirements for A Sole Proprietorship

1. You must file an Assumed Name Certificate with the clerk of county in which the business is conducted ONLY IF you are operating under a name other than the proprietor's (no formation document is required).

2. Personal liability is full- a sole proprietor is personally responsible for all debts of his or her business.

3. The life-span of the business is determined by the individual (proprietorships automatically cease on the retirement or death of the sole proprietor).

4. For purposes of taxation business income is reported and taxed through the sole proprietor's personal tax return.

VI. Conclusion

Section 301 of the Business Corporation Law includes provisions relating to the name of the corporation. For example, the name of the proposed corporation must end with the word "Incorporated" or another word or abbreviation indicative of corporate character. In addition, certain words and phrases require the consent or approval from another state agency prior to filing the document with the Division of Corporations. Although there are several types of business entities contemplated under New York State law, the two most commons are the business corporation and the limited liability company. A new business should consult with an accountant or an attorney to determine which entity is best suited for the respective business, particularly in light of the tax consequences associated with each entity.

US Indo Legal Services
A joint venture law firm promoted by Anand Ahuja Associates, New York, USA and Ram Kishan Associates, Indore, India

Phones- Off (USA) -718-850-1952, 718-668-1258, 212-859-3538
  Phones- Off (India) -91-731-3103689, 91-731-3090201, 91-731-5049358

E-mails- ramkishan@drtsolutions.com or anandesq@hotmail.com

Web- www.usindolegal.com

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Last updated on :- Tuesday 22nd November 2005