Legal Question in Tax Law in New York

Re: Form of Corporation

A LLC (Limited Liability Company) is not a corporation, but is a separate entity for tax purposes. If more than 1 member, it is taxed as a partnership, which is a pass-through tax entity (any gain/loss is reported at the member level, not the entity level). If 1 man, its gain/loss is taxed as part of the owner's return on Schedule "C". If 2 or more, a Form 1065 is filed and the members report their share of gain/loss on Schedule "E" of their personal return. A PC is a Professional Corporation, meaning its shareholders are limited to licensed professionals in the same profession. Whether 1 or more shareholders, a return is filed for the entity on Form 1120. The entity can be regular or Subchapter "S". The former stands alone for tax purposes, while the latter is a pass-through entity, treated like the 2 or more member LLC in this regard. The major distinction is what tax forms are filed and there may be minor state tax differences (e.g., there is a minimum tax for a corporation, which is usually higher than any membership tax on a LLC). Both provide limited liability to its members/shareholders if no personal guarantees are given to creditors. I usualy prefer using the LLC (a more recent invention) to a corporation. Hope this gives you some general information. If you need more information, contact me.