LLC vs. Corporation vs. Partnership in New York State: Which Entity Type Is Right for You?

Choosing the right business structure is one of the most consequential decisions you will make as a business owner. It affects how much you pay in taxes, how much personal liability you carry, how much paperwork you file, and how investors and lenders perceive your business. New York recognizes several business structures, each governed by its own body of state law, with different formation requirements, ongoing obligations, and strategic tradeoffs.

This page explains the main entity types available in New York and helps you think through which structure fits your situation. If you want a quick answer, start with the comparison table and decision framework below — then read the detailed sections for whichever entity type interests you most.

Note: This page is for informational purposes only and does not constitute legal or tax advice. The right entity choice depends on your specific circumstances. Consult a CPA and/or business attorney before deciding.

Quick Comparison Table

Sole Proprietorship LLC C-Corporation General Partnership Limited Partnership
Personal liability protection None Yes Yes None General partner: none. Limited partners: yes
NY formation filing required No Yes Yes No Yes
NY formation fee None $200 $125 None $200
Publication requirement No Yes No No No
Biennial statement required No Yes Yes No Yes
Default tax treatment Pass-through Pass-through Double taxation Pass-through Pass-through
NY annual LLC/partnership filing fee No Yes (if NY source income) No Yes (if NY source income) Yes (if NY source income)
NY corporate franchise tax No No (unless electing corp. tax) Yes No No
Management flexibility Complete High Lower (board required) Complete Moderate
Best for Solo freelancers, testing an idea Most small businesses Venture-backed startups, public companies Informal co-ventures Real estate, private equity

The Decision Framework: How to Choose

If you want a quick answer before reading the detail, use this framework. For most people, the choice is simpler than it looks.

Choose an LLC if:

The LLC is the right default choice for the vast majority of small businesses in New York. If you are unsure and your business is relatively straightforward, start here.

Choose a C-Corporation if:

Choose an S-Corporation if:

Choose a Limited Partnership if:

Stay a Sole Proprietorship or General Partnership only if:

Detailed Guide to Each Entity Type

The sections below cover each entity type in depth — formation requirements, liability, tax treatment, ongoing obligations, and when each structure makes sense.

Sole Proprietorship

What it is

A sole proprietorship is the simplest business structure — and in New York, it requires no formation filing at all. If you are a single person conducting business without registering any entity, you are by default a sole proprietor. The business and the owner are legally the same person.

Liability

This is the sole proprietorship's fatal flaw: there is no separation between you and your business. If your business is sued or owes a debt, your personal assets — your home, savings, and car — are fully exposed. For any business with meaningful revenue, customers, employees, or contracts, this is an unacceptable risk that an LLC can solve for $200.

Tax treatment

All business income flows directly to your personal tax return (Schedule C). You pay self-employment tax (15.3% on net earnings up to the Social Security wage base, 2.9% above it) in addition to ordinary income tax.

When it makes sense

Testing a very early-stage idea before committing to formal registration. Extremely low-revenue, low-risk activities where the cost of formation is genuinely disproportionate to the business's scale. Any business with real customers, vendors, or contracts should graduate out of sole proprietorship as quickly as possible.

New York-specific notes

If you operate under a name other than your own legal name — for example, "Jane Smith" is a sole proprietor, but she does business as "Hudson Creative" — she must file a Certificate of Assumed Name (DBA) with the county clerk in each county where she does business. The filing fee varies by county but is typically around $25–$100. This does not create an entity or provide liability protection; it simply registers the trade name.

Limited Liability Company (LLC)

What it is

The LLC is the most popular business structure for small businesses, startups, freelancers, and real estate investors in New York. It combines the liability protection of a corporation with the tax flexibility and management simplicity of a partnership.

Formation

Filing: Articles of Organization (DOS-1336) Fee: $200 Filed with: New York Department of State Publication requirement: Yes — within 120 days of formation, notice must be published in two county-designated newspapers for six consecutive weeks, followed by a Certificate of Publication ($50 filing fee). See our full guide to the New York LLC publication requirement.

Liability

Members of an LLC are not personally liable for the debts or obligations of the business. Their personal assets are protected. This is the LLC's defining advantage over sole proprietorships and general partnerships.

One important caveat: the liability protection can be pierced if a court finds that the LLC is being used as an alter ego of its members — for example, if members commingle personal and business funds, fail to maintain proper records, or use the LLC to commit fraud. Maintaining a separate business bank account and following basic corporate formalities is essential to preserving the protection.

Tax treatment

The LLC's greatest strength is its tax flexibility.

Single-member LLCs are treated as disregarded entities by default for federal tax purposes — the owner reports business income on Schedule C of their personal return, exactly like a sole proprietor, but with liability protection. Single-member LLCs are exempt from New York's annual LLC filing fee if they have no New York source gross income.

Multi-member LLCs are treated as partnerships by default — pass-through taxation, with each member reporting their share of income on their personal returns. Subject to New York's annual filing fee via Form IT-204-LL.

S-corporation election: An LLC can elect to be taxed as an S-corporation by filing IRS Form 2553. This can reduce self-employment tax for profitable businesses by allowing the owner to split income between a salary (subject to payroll taxes) and distributions (not subject to self-employment tax). Consult a CPA before electing S-corp status.

C-corporation election: An LLC can also elect to be taxed as a C-corporation, though this is rare and usually not advisable for small businesses.

Management

LLCs can be managed by their members (member-managed) or by designated managers (manager-managed). This structure is set forth in the Operating Agreement, which all New York LLCs are required to adopt under Section 417 of the LLC Law.

Ongoing compliance

When it makes sense

The LLC is the right default choice for the vast majority of small businesses in New York: freelancers, consultants, service businesses, retail businesses, restaurants, real estate investors, and early-stage startups that are not planning to raise venture capital.

C-Corporation

What it is

A corporation is a separate legal entity owned by shareholders and managed by a board of directors. It is the oldest and most formal business structure, governed by New York's Business Corporation Law (BCL).

Formation

Filing: Certificate of Incorporation Fee: $125 Filed with: New York Department of State

No publication requirement — corporations in New York are not subject to the newspaper publication requirement that applies to LLCs.

Liability

Shareholders are not personally liable for the corporation's debts or obligations. The liability protection is comparable to an LLC, subject to the same caveat about piercing the corporate veil.

Tax treatment

C-corporations are subject to double taxation: the corporation pays corporate income tax on its profits, and shareholders pay personal income tax again on dividends they receive. In New York, C-corporations are subject to the New York State corporate franchise tax.

For small businesses, this double taxation is typically a significant disadvantage. However, for businesses planning to reinvest profits rather than distribute them — particularly venture-backed startups — the C-corporation can be more tax-efficient than it appears.

New York corporate franchise tax: New York corporations are subject to the corporate franchise tax under Article 9-A of the Tax Law. The tax is calculated as the greater of a tax on business income, a tax on business capital, or the fixed dollar minimum. The fixed dollar minimum ranges from $25 for corporations with under $100,000 in New York receipts to $200,000 for corporations with over $1 billion in New York receipts.

Management structure

Corporations require more formal governance than LLCs: a board of directors, officers, bylaws, shareholder meetings, and minutes of proceedings. Under New York BCL Section 602, corporations must hold annual shareholder meetings, though failure to hold one does not automatically cause dissolution.

After filing, an organizational meeting of the incorporators must be held to adopt bylaws and elect directors.

Biennial statement

Corporations file a biennial statement every two years, with a $9 filing fee. For corporations, the biennial statement requires additional information beyond what LLCs must provide: the name and address of the chief executive officer, the address of the principal executive office, and the number of directors on the board including how many are women.

When it makes sense

The C-corporation is the structure of choice for businesses that plan to raise venture capital or angel investment, seek to go public at some point, need to issue multiple classes of stock (common and preferred), or have employees in multiple states and want a single well-understood legal structure. Most venture capital funds are legally prohibited from investing in pass-through entities, making the C-corporation a practical necessity for startups on a venture track.

S-Corporation

What it is

An S-corporation is not a separate entity type under New York law — it is a C-corporation that has made a federal tax election under Subchapter S of the Internal Revenue Code (IRS Form 2553) and a corresponding New York election (Form CT-6). The legal structure is identical to a C-corporation; only the tax treatment differs.

Tax treatment

S-corporations are pass-through entities for federal tax purposes: profits and losses flow to shareholders' personal returns. There is no federal-level corporate income tax. This eliminates the double taxation problem of a C-corporation.

The primary tax advantage of an S-corporation is the potential to reduce self-employment taxes for profitable business owners. An S-corp owner who works in the business must pay themselves a "reasonable salary" subject to payroll taxes — but any additional profits distributed as dividends are not subject to self-employment tax. For a profitable business, this can result in meaningful annual tax savings.

New York State note: New York does not fully conform to the federal S-corporation election. New York S-corporations are still subject to the New York corporate franchise tax, though at a reduced rate (the "fixed dollar minimum" under the Tax Law, rather than the full business income tax). This is an important nuance — the New York tax savings from an S-corp election are less dramatic than the federal savings.

Eligibility requirements

To elect S-corporation status, the corporation must: have no more than 100 shareholders, have only one class of stock, have shareholders who are all U.S. citizens or permanent residents (no foreign shareholders, no other corporations or partnerships as shareholders), and not be certain ineligible corporation types.

When it makes sense

Small to mid-sized businesses that are consistently profitable, have a small number of owners who are all U.S. persons, do not plan to raise outside equity investment, and want to reduce self-employment taxes. A CPA should run the numbers before making this election — the tax savings are real but the administrative overhead and restrictions are also real.

General Partnership

What it is

A general partnership is formed automatically when two or more people carry on business together for profit. Like a sole proprietorship, no formal filing is required to create one. If you and a friend start a business together and split the profits without registering anything, you are a general partnership under New York law.

Liability

Every general partner has unlimited personal liability for the debts and obligations of the partnership — including debts created by the other partners acting in the ordinary course of business. If your business partner makes a bad deal or gets sued, you are personally on the hook for the consequences. This is a significant and often underappreciated risk.

Tax treatment

Partnerships are pass-through entities. The partnership itself does not pay income tax. Profits and losses flow through to each partner's personal tax return in proportion to their ownership share. The partnership must file an informational return (Form IT-204 in New York) but pays no entity-level income tax.

NY annual filing fee

General partnerships with New York source gross income are subject to New York's annual partnership filing fee, filed via Form IT-204-LL. The fee ranges from $25 to $4,500 depending on New York source gross income. Partnerships with no New York source income owe a minimum $25 fee.

When it makes sense

Informal arrangements between trusted parties at the very early stages of a venture, before the business has real assets or revenue. In nearly all cases, a multi-member LLC offers the same tax flexibility with the addition of liability protection, and is preferable.

New York-specific notes

New York does not require a formal partnership agreement, but having one is strongly recommended. Without one, disputes between partners are governed by the New York Partnership Law's default rules, which may not reflect the parties' actual intentions.

Limited Partnership (LP)

What it is

A limited partnership has two types of partners: at least one general partner, who manages the business and has unlimited personal liability, and one or more limited partners, who contribute capital but do not participate in management and whose liability is limited to their investment.

Limited partnerships must be formally registered with the New York Department of State by filing a Certificate of Limited Partnership.

Formation

Filing: Certificate of Limited Partnership (DOS-970) Fee: $200 Filed with: New York Department of State

Liability

General partners have unlimited personal liability, just as in a general partnership. Limited partners are protected — their personal assets are not at risk beyond their investment — as long as they do not participate in management of the business. If a limited partner begins acting like a general partner, they may lose their liability protection.

Tax treatment

Same as a general partnership: pass-through taxation, with profits and losses flowing to each partner's personal return. Subject to New York's annual partnership filing fee (Form IT-204-LL).

Biennial statement

Yes — limited partnerships must file a biennial statement with the Department of State every two years, with a $9 filing fee, in the anniversary month of formation.

When it makes sense

Real estate investment funds, private equity vehicles, and other capital-raising structures where some investors want a passive role with limited liability. The general partner — often a management company or LLC — absorbs the operational risk while limited partners are protected. This structure is rarely used for ordinary small businesses.

Professional Entities: PLLC and PC

Two additional entity types deserve mention for licensed professionals in New York.

Professional Limited Liability Company (PLLC)

A PLLC is a special LLC available to licensed professionals whose services are regulated by the state — including physicians, dentists, attorneys, architects, engineers, and certain others. If your profession requires a state license, you may be required to form a PLLC rather than a standard LLC. The formation process is similar, but requires additional approval from the professional licensing board before the Articles of Organization can be filed with the DOS. The formation fee is $200, and the publication requirement applies.

Professional Corporation (PC)

A PC (also called a professional service corporation) is the corporate equivalent of a PLLC. The formation fee is $125. Unlike a PLLC, a PC is subject to the corporate franchise tax. The primary liability protection in a PC is limited compared to a regular corporation — shareholders are still personally liable for their own professional malpractice, though not for the malpractice of their fellow shareholders.

A Note on Delaware

One question that comes up frequently: should I form my entity in Delaware instead of New York?

Delaware is famous for its business-friendly corporate law and its Court of Chancery, and many large corporations and venture-backed startups are incorporated there. However, for most small businesses operating primarily in New York, forming in Delaware offers little practical benefit and adds cost and complexity.

If you form in Delaware but operate in New York, you must register as a foreign entity in New York — paying New York's registration fees and complying with all of New York's ongoing requirements anyway. You will effectively be paying and filing in two states for no material benefit.

The one scenario where Delaware makes sense for a small business is if you are specifically planning to raise venture capital, as many VC funds strongly prefer Delaware C-corporations and the Delaware corporate law's investor-protection provisions. For everyone else, New York is the right choice.

More Resources

This guide is for informational purposes only and does not constitute legal or tax advice. Laws and fees are subject to change. Consult a qualified attorney and CPA before choosing a business structure. Verify current requirements at dos.ny.gov and tax.ny.gov.