| “I want to set up an S Corp for tax and legal reasons. Would I be better off incorporating in NJ (where I reside) or in NY (where I most often work)? I've heard conflicting things regarding prohibitive fees, franchise tax, etc.”----> When choosing a business entity to start a business there are many factors to consider when determining which entity is the best fit for your company and its goals. Some factors to consider are the ease of formation, taxation, need to raise future capital and limited liability. New Jersey does not entirely eliminate the New Jersey Corporation Business Tax for S Corporations. New Jersey allows for reduced taxes based on the difference between the highest personal tax rate and the corporation business tax rate. This is in contrast to the standard 9 percent tax rate for non-S Corporations. The biggest detriment of a S Corporation in New Jersey is that lenders may not accept the S Corporation's pledges as the sole remedy in the event of a default and demand personal guarantees from the shareholders which eliminates the limited liability benefits of the corporate form. In addition buy-back and majority vote provisions may freeze out minority shareholders or prevent minority shareholders from liquidating their interests in the corporation. New York S Corporation shareholders normally enjoy limited liability and can lose no more than the amount they invested in the corporation .New York S Corporation shareholders cannot normally be held liable for legal judgments against the corporation or for any of the corporation’s debts or obligations .Protection of New York S Corporation shareholders’ personal assets is one of the major reasons New York business owners choose to incorporate.. A New York S corporation shareholders enjoy limited liability for the debts, obligations and liabilities incurred by the business as well as liability stemming from possible legal action. Protection of shareholders’ personal assets is one of the major reasons New York business owners choose to incorporate. Normally, shareholders cannot lose more than the amount they invested in the corporation. If the corporation goes bankrupt, the shareholders will not be liable for its debts. Should someone sue the corporation and the corporation is found liable, they can take the corporation’s property to satisfy the judgment but if that property does not satisfy the judgment, they will not be able to take a shareholder’s personal assets, i.e. home, car, or bank account.ALSO, New York S Corporations are normally audited less frequently than sole proprietorships and partnerships.I guess you need professional help form a Business Attorney in setting up an S corp in NYS or NJ.
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