Our firm advises and represents restaurants, bars, lounges and nightclubs in a broad range of business related services, beginning with a company's corporate structure.
For restaurant operations in New York, there are two main types of corporate business structures utilized, those being a ‘corporation’ and the other being a ‘limited liability company.’ Corporations can be sub-typed into ‘C’ and ‘S’ Corporations which have various tax advantages and drawbacks. For the most part ‘C’ and ‘S’ Corporations are similar in that they offer limited liability protection to their shareholders up to the amount of the shareholders’ respective contributions into the corporation.
Typically, ‘C’ Corporations are large publically traded companies with numerous shareholders. Profits of a ‘C’ Corporation are taxed twice. The corporation pays income tax on the profits it generates, and its shareholders pay income tax on distribution payments they receive from the corporation.
‘S’ Corporations on the other hand are usually small privately held companies with no more than 75 shareholders each of whom, must have a valid Social Security Number issued by the United States. The benefit of an ‘S’ Corporation is that profits are taxed only on distributions issued to shareholders (or, for that matter, those profits that otherwise should be distributed to shareholders).
Limited Liability Companies (“LLC”) are similar to corporations in that an LLC provides limited liability protection to its member owners. In other words, members are only liable for the debts of the LLC up to their respective contributions, with no personal liability whatsoever. As with an ‘S’ Corporation, there is no double taxation in that profits are taxed only upon their allocation to each Member according to their membership interest in the Company. Unlike an ‘S’ Corporation, members need not have a Social Security Number. The major disadvantage to forming an LLC is that unlike an ‘S’ Corporation, after filing your Articles of Organization with the State, you must then publish notice of your LLC’s formation once a week for six consecutive weeks in two different newspapers in the county where your business is formed. The cost for this often exceeds $800 in Kings, Queens and Bronx Counties and $1,100 in New York County.
If you are looking to form a corporation or LLC, please call attorney James DiPasquale for a Free Consultation