Choosing a business structure isn’t just paperwork — it determines liability, taxes, and how easily you can comply with NYC’s Home Improvement Contractor (HIC) rules. Pick wrong and you inherit avoidable risk. Pick right and your business gets easier to operate.

Below, structures are listed in the order we actually recommend for NYC contractors, starting with the strongest option.

1. LLC (Limited Liability Company): Recommended

The LLC is the standard choice for most NYC home improvement contractors. It gives you legal protection, flexible taxes, and pairs cleanly with DCWP licensing.

How it works

An LLC is a legally separate entity. Your personal assets are protected if something goes wrong, as long as you follow basic corporate practices.

Pros

• Strong liability protection

• Pass-through taxation by default

• Can elect S-Corp later (reduces self-employment tax)

• Flexible ownership and management

• Easy to insure

• Trusted by homeowners

Cons

• Costs more than a sole prop

• NY’s publication requirement adds a one-time cost

• Requires minimal recordkeeping

Bottom Line

For 95% of contractors, the LLC is the right move. It's safe, flexible, and fully aligned with DCWP compliance requirements.

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

Corporations add structure and credibility, but also more administrative work. Most contractors don’t start here — they go LLC first, then convert or elect S-Corp.

How it works

A corporation is a separate legal entity with formal governance (directors, minutes, bylaws).

Pros

• Strong liability protection

• Clean structure for multiple owners or employees

• S-Corp election can reduce self-employment tax

• Easier to raise capital or grow staff

Cons

• Most paperwork of all structures

• Running a C-Corp incorrectly leads to double taxation

• Requires more formal recordkeeping and governance

Bottom Line

Great if you're scaling a real operation with employees, trucks, and multiple job sites. Overkill for solo operators.

3. Sole Proprietorship

It’s simple — and exposes you personally to everything that can go wrong.

How it works

You are the business. No separate legal entity.

Pros

• No formation paperwork

• Single tax return

• Lowest upfront cost

Cons

• Unlimited personal liability

• Insurance is harder

• Homeowners trust it less

• Risky for any job with real scope or value

Bottom Line

Fine for very small, informal jobs. Not recommended for full-scope home improvement work.

4. Partnership

A partnership carries all the risk of a sole proprietorship plus the liability of your partner’s decisions.

How it works

Two or more people operate a business jointly. Unless structured as an LLP, partners are personally liable for each other’s actions.

Pros

• Easy to form

• Pass-through taxation

• Flexible profit-sharing

Cons

• Shared unlimited liability

• Partner mistakes become your legal and financial problem

• Disputes can wreck the business

• Not favored by insurers or lenders

Bottom Line

Avoid it. If you're going into business with someone, form an LLC instead.

What NYC Contractors Actually Choose

Here’s how it plays out in the real world:

• LLC → The overwhelming majority

• Corporation/S-Corp → Used by bigger, established multi-crew contractors

• Sole Proprietorship → Mostly handymen and micro-operators

• Partnership → Almost never used (too risky)

If you plan to operate legally in NYC and stay compliant with DCWP rules, the LLC is almost always the right move.

Comparing Business Types

Final Recommendation

If you’re serious about operating a compliant NYC home improvement business, form an LLC. It protects your personal assets, aligns with DCWP’s contract and licensing requirements, and gives you the option to elect S-Corp later for tax efficiency.

If your revenue grows and you pay yourself a steady salary, talk to your accountant about when an S-Corp election makes sense.