The Limited Liability Company (LLC) is a relatively new form of business entity. An LLC combines the benefits of a partnership (pass through taxation and fewer formalities) with that of a corporation (limited liability and perpetual duration). Operating under a formal entity like an LLC also adds legitimacy to your business. If you plan to do business in New York, we can help you form a New York LLC.

From a liability protection standpoint, the LLC has a superior advantage over the corporation. Courts consider whether a company’s management has followed certain formalities when deciding to hold the company’s owners personally liable for the company’s liabilities. As LLCs require fewer formalities, there is less room for error.

Out of the box, an LLC has a slight disadvantage over the s-corporation from a tax standpoint. However, depending on the composition of LLC members, these disadvantages can be overcome. We encourage you to discuss these unique tax issues with your accountant.

In some states, LLCs also offer a second layer of protection. “Charging order protection” was born from English partnership law out of the policy that partners should be able to choose their partners. What this means is that if a member of your LLC owes someone money, that person cannot take control of that member’s ownership rights. In a corporation, where there is no charging order protection, a court may take away stock from a stockholder and give it to the stockholder’s creditors.

New York law does not recognize the charging order as a creditor’s “exclusive remedy.” If charging order protection is especially important to you, you may wish to consider forming an LLC in Delaware.

Licensed professionals cannot operate the business of their professions using a standard LLCs. If they seek the liability protection that an LLC offers, they may form a professional service corporation (PC), registered limited liability partnership (LLP) or professional service limited liability company (PLLC).