Legal Question in Business Law in New York

Re: Incorp

Let me go for the second question first.

Delaware is famous for its pro-business law and for its court system that is very, very well-versed in business law. Those are the advantages of incorporating in Delaware, and that is why many large businesses are incorporated in Delaware.

New York's business law differs from Delaware's, as does New York's outlook on business affairs of litigants. Delaware law works under the premise that everyone in business is sophisticated and negotiates every clause in a contract at arm's length. New York law is more paternalistic, and will work a bit harder to protect the little guy in a contract dispute.

If you are a small company/entrepreneur located in NY, the advantages of incorporating in Delaware are massively outweighed by the fact that once you incorporate in a foreign state (Delaware is foreign to New York), you become subject to the personal jurisdiction of the courts in the state in which you incorporate. That is, if you get sued, you can just as well have to defend the suit in Delaware as in New York. This can be remarkably inconvenient if you're trying to run your business in New York but you have to show up for all these court dates (and pay for overnight lodging for yourself and possibly for your attorneys) in Delaware.

Also, it is a disadvantage for a small business to incorporate out of state because then that business is subject to taxation in the state of incorporation AND in the state where the principal place of business is located. Talk about double taxation!

"Incorporating" is a subset of "registering." When you incorporate a business, you register that business with the Secretary of State in NY. When you form an LLC, you register that business with the Secretary of State in NY. When you form a partnership (general or limited), you register that business with the Secretary of State in NY. When you form a sole proprietorship, you register that business NOT with the Sec. of State but with the County Clerk of the county or counties in which you will be doing business.

Re: Incorp

You register a company with the state in order to have it recognized as a separate entity by the state. "incorporate" is just a word used for the something similar for corporations. Unless you are in Manhattan, I usually suggest an LLC. And you may be able to set it up in a state that doesn't have state tax, such as FL, TX, NV. We routinely do this type of work and counseling.

Re: Incorp

The previous posts were right on. I would emphasize the TAX stakes involved in choosing the proper business form/entity and deciding which state to register/incorporate in (DE v. NY). Depending on your business model, I recommend that you consult with an attorney that can assist you in choosing the proper business entity/state. Good Luck!

Re: Incorp

The state you decide to form your business in will depend on your specific business plan and type of business. You may setup a company in Delaware but then end up having to register as doing business in New York as well. This was mentioned in a previous post, but the importance of sitting down with a qualified attorney to discuss your options before you invest the money is a point that bears repeating.