OWN AN LLC? WHAT IS HAPPENING TO NEW YORK BUSINESSES ON FEB 27 MAY BE COMING TO A QUAD STATE NEAR YOU SOON

Depending on the mood at any Quad State statehouse and their legislatures, you may be having to put up with what New York LLC owners are going to be going through as of February 27.

What ‘kind’ of corporate structure, LLC vs. standard corporate entity, your attorney or accountant puts you into can be changed with the stroke of a pen by a legislature.

Let’s look at what is set to happen on Feb 27 in New York.

The state of New York thinks it has found a new revenue base in their LLC businesses. And other states are looking at their actions with an eye on possibly repeating the gig on their home turf.

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Isn’t This Simply a Matter of Initials in How You Form Your Business–LLC Vs. Inc?

Well, it used to be a decision between LLC and Inc. And it still is in most states.

Put simply, limited liability is a wall between the owner’s personal and business assets that protects an owner’s personal assets from the entity’s debts liabilities and obligations. Limited liability can also protect the entity from the owner’s personal debts, liability and obligations. (Remember, whether you are an LLC or an Inc., all the entity’s assets are at risk for the entity’s debts.)

The Corporation: While incorporating may protect the shareholders assets from the company’s creditors, the company may be at risk from the shareholder’s creditors. How? The creditors of a shareholder can attach the shareholder’s stock and assume all the shareholders rights. These rights include voting for directors and even voting to dissolve the corporation, if the shareholder had a controlling interest.

The LLC: Limited liability companies also protect the owner’s assets from business creditors. And, in some circumstances may offer better protection for the entity. Why? Because a member’s creditor cannot touch the member’s ownership in the LLC; the creditor cannot become a member although the creditor will be entitled to the member’s economic right to distributions from the LLC.

So There Is Coming a New York Law That Puts LLC Owners Wealth at Risk

In sum, the new law reduces a previously significant difference between a New York LLC and a New York corporation. Keep in mind, though, that there are still many other solid differences between an LLC corporation and an Inc. structure.

However, similar to owners of corporations with employees, the owners of LLCs structure are now subject to liabilities they didn’t plan on (to put it mildly).

Businesses with employees should be aware of how the new law could impact them.

Quad State firms can Google the New York LLC law…we will be writing more on this in the future. Those founders that set up our ‘more perfect union’ in the first place would be shocked at how little the ‘small’ matter of a Constitution of the United States is being adhered to these days. (But I digress.)

While we do not wish to go over again of the differences between the Close Corporation, the LLC and the standard voting stock Corporation, one of the reasons most entrepreneurs select the LLC is that they don’t have to have and record meetings.

The law that will be put in play on the 27th says that the owner of the LLC can be liable for certain employ wages—whether or not the owner and the employee had an understanding. We know that most laws spring from wanting to right a wrong, but seeing the huge increase in business regulations within just the past six years, every new thing adds a burden to the owner.

New York’s corporation law has been amended (effective February 27th) and now, for New York entrepreneurs this time (watch out other states), the advantages of having a New York LLC over a regular New York corporate entity no longer exists in large part.

We urge entrepreneurs in Pennsylvania, Maryland, West Virginia and Virginia to keep a sharp eye to any changes in their state’s corporation law.

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About Steve Lanning

Steve Lanning is a nationally recognized entrepreneur who has been creating his own paycheck since 1975 and loves to help others do likewise. As the founder of both the National Association of Business Coaches (sold in 2002) and the Consultants National Resource Center (for all marketers of professional services), he and his family have lived in three of the four states in our Quad State region. His passion is to see individuals and small businesses, start-ups to mature, discover and promote their strengths in building revenue streams individually, that, collectively, make for a strong region as reported on and celebrated by the Quad State Business Journal. He can be contacted at AdviceMarketing@gmail.com.

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