- Entity selectionSole proprietor, single- or multi-member LLC, S corporation or C corporation, compared on your actual numbers.
- Tax registrationsEIN, state tax accounts, payroll and sales tax registrations in New Jersey and New York.
- Books from day oneQuickBooks Online set up with a chart of accounts built for your tax return.
- First-year planningOwner pay, quarterly estimates and the elections that have deadlines.
The main choices
- Sole proprietorship or single-member LLC: simplest. Profit is reported on your personal return and subject to self-employment tax. An LLC adds liability protection but is usually ignored for federal tax.
- Multi-member LLC or partnership: taxed as a partnership by default, with a separate return (Form 1065) and K-1s to each owner. Flexible, but the operating agreement matters.
- S corporation (an election, not an entity): an LLC or corporation can elect it. Owners who work in the business take a reasonable salary through payroll; remaining profit avoids self-employment tax.
- C corporation: pays its own 21% federal tax, with a second tax when profits are paid out as dividends. Often the choice for companies raising outside capital, and the only entity that can issue qualified small business stock.
The setup checklist
- Form the entity with the state (we coordinate with your attorney on legal documents).
- Get a federal Employer Identification Number (EIN) from the IRS. It's free.
- Register for state tax accounts: in New Jersey through the Division of Revenue; in New York through the Department of Taxation and Finance.
- Open a separate business bank account. Never mix personal and business money.
- Set up bookkeeping and, if you'll have employees or an S election, payroll.
- Register for sales tax if you sell taxable goods or services.
- Calendar the deadlines: S elections, annual reports, estimated taxes and pass-through entity tax elections.
New York's publication requirement
New York LLCs must publish notice of their formation in two newspapers and file proof with the Department of State, generally within 120 days of formation. In some counties this costs more than the formation itself, so budget for it.
Frequently asked questions
Should I form an LLC or an S corporation?
They aren't alternatives: an LLC is a legal entity, and an S corporation is a tax election that an LLC can make. The real question is whether your LLC should elect S status, which depends mainly on your profit level and what a reasonable salary is for your role.
Do I need an attorney or a CPA to form a business?
Ideally both: an attorney for the formation documents and operating agreement, and a CPA for the tax structure, registrations and elections. We coordinate with your attorney.
When should I elect S corporation status?
Generally within two months and 15 days of the start of the tax year you want it to apply to, once profits are high enough to justify payroll and the extra return. Late-election relief is often available.
Can I change my entity later?
Usually yes, but some changes have tax consequences, and converting out of a corporation can be costly. It's easiest to get it right at the start.