For a New York City restaurant owner, the entity you choose isn’t just a formality — it affects your taxes, personal liability, fundraising options, and even how easily you can sell or expand later. Too often, owners grab a quick online LLC and hope for the best. That can work…until it doesn’t.

This guide walks through the key entity choices for NYC restaurant owners and what you should be thinking about before you sign a lease or take investor money.

The Big Three: LLC, Corporation, or Partnership?

A. Limited Liability Company (LLC)

For most independent restaurants, a multi-member LLC is the default choice.

• Pass-through taxation (profits and losses flow to the owners’ personal returns).
• Flexible ownership and profit-sharing arrangements.
• Fewer corporate formalities than a traditional corporation.
  
  

B. Corporation (C-Corp or S-Corp)

• C-Corp: Separate taxpayer; potential “double tax” on profits and dividends. More common for larger hospitality groups or concepts that plan to scale and raise institutional capital.
• S-Corp: Possible single level of tax, but strict eligibility rules and less flexibility on multiple classes of equity.
  
  

C. Partnerships & Sole Proprietorships

• Simple to set up, but generally poor choices for a restaurant because they leave owners personally exposed to business debts and liabilities.
  
  

NYC and New York State Tax Considerations

Entity choice interacts with New York tax in ways many owners don’t see coming:

• LLCs and partnerships may face the NYC Unincorporated Business Tax (UBT) on certain income.
• Corporations may pay different New York State and City corporate taxes but avoid UBT.
• Your personal income level, other investments, and whether you plan to reinvest profits all affect the “best” answer.
  
  

This is where a quick meeting between your lawyer and accountant can save years of regret.

Liability Protection: What the Entity Really Does (and Doesn’t) Do

Any limited liability entity (LLC or corporation) is designed to:

• Shield your personal assets from most business liabilities.
• Limit creditor recovery to company assets, if you respect the corporate formalities.
  
  

However, no entity protects you from:

• Personal guarantees on leases and loans.
• Your own personal wrongful acts (e.g., fraud).
• Certain unpaid “trust fund” taxes (like sales and payroll taxes).
  
  

The entity is a shield, not a force field. It needs to be set up correctly and maintained.

Ownership, Control, and Flexibility

Different entity types handle ownership differently:

• LLCs allow flexible allocations of profits and losses that don’t have to match percentage ownership.
• Corporations use shares and classes of stock; more rigid but more familiar to institutional investors.
• If you anticipate multiple rounds of investment, a future franchising model, or outside equity partners, a carefully structured LLC or a corporation may be better than a casual LLC thrown together at the last minute.
  
  

Future-Proofing: Expansion, Sale, and Succession

Choose the entity with the endgame in mind:

• Expansion: Will you open multiple locations, bring on new partners, or create a management company?
• Sale: Do you envision a future buyer purchasing the entity itself or just the restaurant’s assets?
• Succession: If you want to pass the business to family, entity structure will determine how easily you can transfer ownership interests.
  
  

Good formation work today makes those later moves cheaper and cleaner.

Practical Steps Before You File Anything

Before you file a single document:

• Meet with a restaurant-savvy CPA and attorney together.
• Map out your expected investors, locations, and time horizon.
• Decide whether you need more than one entity (for IP, real estate, or future locations).
• Make sure your formation matches your actual business plan, not just a form you found online.
  
  

Conclusion

Choosing the right entity for your NYC restaurant is one of the most important early business decisions you’ll make. It affects everything from your tax bill to your risk exposure and exit options.

If you’re preparing to open — or thinking about restructuring an existing restaurant or business — it’s worth slowing down and getting this step right before you sign the lease, take on debt, or bring in investors. We’re to help guide you through all of this to make sure you make the right choices. As lawyers, our job is to learn about you, your goals and vision, and to provide you with solutions that avoid issues in the future.