How to start a business in New York

Not sure how to form a business in New York? Read our startup guide to learn all the necessary steps.
Edward Kost @EdwardKost
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If you're looking to launch your startup in the Empire State, read this first

Before launching your business in New York, it's important to have an understanding of its startup ecosystem.

Here are some stats to acquaint you with the start up scene in New York:

Startup stats New York infographic

As you can see, New York, is the breeding ground of choice for many startups, and it’s not hard to see why. The ecosystem is booming, and there's plenty of funding available. 

So if you’ve chosen to launch your business in New York, you're definitely starting on the right foot.

Planning your business in New York

Every successful business started with a meticulous plan. If you want to increase the chances of your startup surviving the cut-throat business world, you need to outline your business' growth strategy in a well-thought-out and meticulously documented business plan.

A business plan will help you and your team members stay aligned with all of your business goals and also greatly increase your chances of securing funding.

A business plan also demonstrates to potential investors that you have confident control over the operations and growth of your startup.

Thankfully, we've written an in-depth guide to crafting a winning business plan.

The typical business plan is comprised of the following chapters:

  • Value proposition

  • Market opportunity

  • Target market

  • Competitor analysis

  • Funding required

  • Sales and marketing

  • Financial projections?

  • Milestones

  • Your team

If you're not sure what type of business to launch, here's a list of the top trending business ideas in New York right now.

  • Home food delivery

  • Trip consultant (trip planner / independent travel agent)

  • Property Management

  • Child Care center

  • Insurance broker

  • Fitness business (gym, martial arts, dancing)

  • Event organiser

  • Pet day care (including dog walking, washing, etc)

Don't worry if your business idea doesn't fit with these trends. Any business can be successful with proper planning and comprehensive market research.

Structuring and registering your business in New York

There are 7 main business structures, and all are applicable to both brick and mortar businesses and e-commerce businesses:

  1. Sole Proprietorships

  2. Partnerships

  3. Corporation 

  4. C-Corporation

  5. S-Corporation 

  6. Limited Liability Company (LLC)

  7. Nonprofit

If you're uncertain about which structure best suits you, read our in-depth guide on structuring your business for success.

Regardless of the business structure you choose, you'll need to do the following:

Procedures for all business types 

Get your EIN

If you plan to employ staff, you'll need a unique tax ID number, also known as an Employer Identification Number (EIN).

Even if you don’t plan to hire employees it's a good idea to have an EIN. You'll need it for a business banking account, and many of the forms you'll have to fill out as a business owner will ask for this information.

You can get your EIN one of three ways:

  1. Apply online via the IRS website here.

  2. Fill in this form and then send it by mail using these instructions

  3. Apply by phone by calling the Internal Revenue Service on 1 800 829-4933

There are some other formalities that must be taken care of if you plan on hiring staff:

Obtain relevant licences

Depending on the type of business you're launching you may need a license to operate it.

For a list of license requirements by industry types click here.

Professionals working in New York need to obtain a license to prove their qualification. You can find licensing requirement details here.

To apply for a business license click here.

You can find more information about a specific business license on this website.

The city of New York's Business Wizard portal can help you create a checklist of all the steps you need to take to start a business, including information on some of the licenses you might need.

Obtain relevant permits 

Depending on the location of our business you may need to hold an appropriate zoning permit for your business operations, especially if you plan on running your business from home.

If you plan to renovate your home to accommodate a home office,  you'll need to file for a permit.

Tax registrations

Depending on the nature of your business solution, you may need to register for a Sales Tax Certificate of Authority.

A few of the services subject to sales tax are:

  • Property maintenance, service and repair

  • Computer repair

  • Massage services

  • Tanning salon

For a more comprehensive list of items that are both subject to and exempt from sales tax click here

You can register for sales tax on the New York Business Express portal.

Open a business banking account

A business banking account keeps all your business transactions separate from your personal transactions. You can easily track all profits and losses and take the stress out of your tax prep.

You can find a list of New York banks for small business here.

Register a business name

If  you plan on trading under a business name other than your given name, you'll need to register your business name. 

In New York this registration is known as a “Certificate Under Assumed Name.” You'll obtain the certificate through your county clerk. You can find county clerk contact details here.

Before registering a business name, you need to check to see if it's available. You can do this by searching the Corporation and Business Entity database.

Now let’s dive into the specifics of establishing each business type in New York.

How to start a Sole Proprietorship in New York

If you're planning to run your business alone when you launch it, the simplest business structure to choose is a Sole Proprietorship.

The simplicity of setup and cost effectiveness of this structure comes at a price. The owner accepts full personal liability for all business debts.

But you shouldn’t let this deter you from choosing a Sole Proprietorship. You always have the option of upgrading to a different structure at any time.

You can also mitigate your risk as a Sole Proprietor by choosing strategic insurance policies.

To learn more about Sole Proprietorship insurance options, click here.

If you follow all of the steps listed above (under “procedures for all business types”) you'll have successfully completed the steps of establishing a Sole Proprietorship. It’s that easy.

Tax details for Sole Proprietors in New York 

Because Sole Proprietors are considered indistinguishable entities from their businesses, you'll report all your business income and expenses on your personal tax return.

For more details on your tax obligations as a Sole Proprietor, contact the New York Department of Taxation and Finance or consult with a professional accountant.

If you're hiring employees, you can read more about tax requirements as an employer here

How to form a partnership in New York

A partnership is a business with at least two individuals or entities. There are three different types of partnerships:

  1. General Partnership

This is the standard form of partnership. All general partners share the full liability of any business losses (think of all the members of a general partnership as Sole Proprietors).

  1. Limited Partnership

This type of partnership is comprised of both General Partners and Limited Partners. As the name suggests, limited partners limit their personal liability. This limitation depends upon the amount of money the Limited Partners have contributed to the business.

General Partners have the greatest amount of jurisdiction. A threshold is in place for Limited Partners when it comes to making business decisions.

A Limited Partnership is a good choice if you're only interested in collecting the profits of the business you invest in and not directing it.

If you choose a Limited Partnership, you'll need to file a Certificate of Limited Partnership. There's a $200 filing fee.

  1. Limited Liability Partnership

Limited Liability Partners are protected from any debts caused by other members. This is a good choice for high risk businesses that are structured as a partnership.

Form a partnership agreement

This is not a mandatory requirement of the state, but highly recommended. 

A partnership agreement outlines the roles of each member and how the business is to be run.

It includes details such as:

  • Member decision making

  • WIthdrawal procedures

  • New partner admittance procedures

  • Bankruptcy procedures

  • Allocations of profits among members

A partnership agreement ensures that the business keeps operating efficiently throughout all circumstances. It can also help you secure investor funding and bank loans.

You can draft a partnership agreement yourself or use a template.

Tax details for partnerships in New York

Partnerships, like Sole Proprietors, are indistinguishable entities from their owners, so only one tax return needs to be completed (personal tax return). 

You can find all the relevant forms at the New York State Department of Taxation and Finance and the IRS websites.

How to form an LLC in New York

An LLC business structure will protect your personal assets in the event of a business lawsuit. It is also the minimal business structure you need to officially distribute stock certificates to investors. This official proof of investor ownership makes securing funding much easier for LLCs.

New York, unlike other states, does not require LLC owners to submit annual reports; another reason why launching a business in New York is a fantastic idea.

Naming your LLC

The name of your LLC must end in one of the following:

  • LLC

  • L.L.C

  • Limited Liability Company

There are also some restricted phrases you should be aware of when choosing a name for your LLC.

Elect a registered agent for your LLC

A registered agent is the middle entity between your business and all outside mail correspondence. The purpose of a registered agent is to guarantee the acceptance of all your business mail.

A registered agent must meet the following criteria:

  • Have a physical address in New York (cannot be a PO Box)

  • Guarantee availability throughout business hours

  • Accept the duties of accepting all mail on your behalf

Professional registered agent services 

Here's a list of suggested registered agents in New York:

Submit Articles of Association 

The Articles of Association form formalizes the formation of your LLC. 

You can submit your Articles of Association online. You can find instructions on filing your Articles of Association here

Publicize LLC formation

You also need to publicly announce your newly founded LLC. This is done by publishing your Articles of Association in both weekly and monthly publications for 6 weeks.

Make sure you commence the publication process within 120 days of your Article of Association taking effect. You're free to contact newspaper publications yourself or hire a third party to reach out to them for you.

If you don't want to publish your Articles of Association, you can just publish an announcement of your newly formed LLC. 

When your LLC has been publicized you'll need to fill out a Certificate of Publication and list all of the outlets you published your LLC announcements in. There's a $50 filing fee.

Create an operating agreement for your LLC

This step isn't mandatory, but we highly recommend it.

You can craft an operating agreement yourself or use a template.

In your operating agreement, you'll need to decide if your LCC will be member-managed or manager-managed. A member-managed LLC is controlled by all of its members. All business decisions are made collectively via a voting system. A manager-managed LLC is controlled by an elected manager (or managers) that makes business decisions on behalf of all members.

Submit a Biennial Statement

The purpose of this statement is to ensure the State of New York has the most up-to-date records about your business.

You don't need to worry about accessing this statement yourself. It will be automatically sent to your registered agent, or you can file it online.

Tax details of LLCs in New York

A single member LLC can elect to be classified as a Corporation or a Sole Proprietor for federal tax purposes. 

If an LLC is comprised of at least 2 members it can choose to be classified as a corporation or a partnership when submitting taxation forms.

In order to keep your LLC active in New York, you'll need to pay an annual filing fee. You must pay your fee on the 15th day of the 3rd month after the close of the tax year. Be sure to mark this deadline in your calendar because no extensions are granted.

You can find all the relevant New York tax forms here, and you can find the relevant IRS forms here.

How to form a Business Corporation in New York.

A corporation is the most complex business structure available. It's also the most accommodating structure if you decide to go public in the stock market.

There are two different types of Corporations:

C-Corporations 

A C-corporation is the standard type of corporation. 

This is also the most complex business structure so there's a lot of added administrative work involved. 

Some of the benefits of a C-Corporation are:

  • No restriction to number of owners

  • Owners can be nonresidents

  • Readily transferable shares

  • Immortal life (unless otherwise specified in Certificate of Incorporation)

S-Corporations

S-corporations do not undergo the “double taxation” process of C-corporations. Taxation only occurs once at a personal level for each member.

If you choose to an S-Corporation identity, you'll need to elect this classification manually with the IRS (more on that in the taxation section below).

Some of the benefits of choosing an S-Corporation are:

  • Classified as a ‘Pass-Through-Entity” so taxation only occurs once at a personal level

  • Ease of ownership transfer without tax consequences

  • Members can receive tax-free dividends to the extent of their investment

Naming your Corporation

All Corporations in New York must add one of the following words to the end of their business name:

  • Limited

  • Incorporated

  • Incorporation

You can also check the availability of your prospective Corporation name in the Corporation and Business Entity database.

If you have a perfect business name in mind but you're not quite ready to submit any official documentation, you can reserve your business name for up to 60 days.

Elect a registered agent

This process of appointing a registered agent is the same as the process for LLCs.

Submit Certificate of Incorporation

This formalizes the establishment of your Corporation in New York. You can access the form here and submit it via mail, or complete the submission process online.

Complete a Corporate Records Book

A Corporate Records Book stores all of the important records of a Corporation, such as stock certificates and meeting minutes.

You can curate this records book yourself or pay a professional to create it for you.

If you have multiple office locations, your Corporate Records Book should be stored in your primary location.

You should also keep your corporate bylaws in your Corporate Records Book 

Create a list of Bylaws

Bylaws are the rules that govern your Corporation. This isn't a requirement in New York, but it's highly recommended. 

Host Initial Director Board meeting

This is an opportunity for you to complete all the formalities that must be taken care of prior to commencing business operations, such as distributing stock and creating Bylaws.

You should also elect your first corporate directors during this initial board meeting. These directors are temporarily put in place until new members are voted in to serve during your first annual board meeting.

You must keep a record of all appointed directors in your Corporate Records Book as an “Incorporator’s Statement.”

Submit Certificate of Incorporation.

The submission of this document formalizes the establishment of your Corporation. You can file  this document online or via mail.

If you are establishing a professional Corporation you will need to file a Certificate of Incorporation pursuant to Section 1503 of the Business Corporation Law.

The Certificate of Corporation form for professional services can be accessed here.

To check if your Corporation is classified as a Professional entity, refer to the New York State list of licensed professionals.

  

Submit Biennial Statement

The process of submitting a biennial statement for Corporations is the same as the process for LLC’s 

Tax details for Corporations in New York

If you choose to be an S-Corporation, you'll need to notify both the State of New York and the IRS.

Notifying IRS of S-Corporation status

You'll need to submit form 2553 to file for S-Corporation status with the IRS.

Notifying State of New York of S-Corporation status

To notify the State of New York of identity as an S-Corporation, you need to submit form CT-6.

Franchise tax

Depending on your business operations, you may be liable to pay Franchise Tax. You can estimate the amount of Franchise Tax payable using an online Franchise Tax estimator.

IRS taxation forms for Corporations 

Tax forms for C-Corporations can be found on the IRS website here.

Tax forms for S-Corporations can be found on the IRS website here.

How to form a Nonprofit in New York.

Nonprofits enjoy the benefits of tax exemption, but members need to prove their nonprofit's intentions before being granted these exemptions.

Forming a nonprofit in New York

Nonprofits in New York as classified as either a religious or nonreligious corporation.

There are four different sub-classifications of nonreligious nonprofits in New York:

Type A

These include the following industries:

Athletic, agricultural horticultural, fraternal and social.

Type B

These include the following industries:

Educational, animal and children cruelty prevention

Type C

These include public operations performed by business corporations.

Type D

Other purposes

You can classify a nonprofit as a "multiple type."

Elect initial directors 

You must elect at least 3 initial directors to oversee your nonprofit in New York. These directors must be at least 18 years of age. There are no residency restrictions for these directors.

Naming your Nonprofit

Your nonprofit's name needs to end in any one of the following:

  • Incorporated

  • Corporation 

  • Limited

  • Inc

  • Corp

  • Ltd

Be mindful of important restrictions when choosing a name for your nonprofit. 

Submit nonprofit Certificate of Incorporation

In this document you can specify the type of your nonprofit (eg, Type A, B etc). You can access the Nonprofit Certificate of Incorporation here

Obtain New York agency consent

In New York, certain nonprofit activities require agency approval. Each written consent must be added to the Certificate of Incorporation. 

You can find a list of nonprofit operations that require agency approval in New York here.

Complete a Corporate Records Book for your nonprofit

This records book should store all of your meeting minutes, bylaws and certificate of Incorporation.

You can create this records book yourself or pay a professional to create it for you.

Host initial board of directors meeting

During this meeting, all members should collaboratively create a list of bylaws to govern the nonprofit.

This is also an opportunity for all members to elect initial directors.

Tax details for nonprofits in New York

Nonprofits in New York need to file for Federal and State level tax exemption.

Applying for federal level tax exemption:

You will need to fill out Form 1023 to register for Federal tax exemption. Smaller nonprofits with projected annual gross receipts of less than $50,000 and total assets worth less than $250,000 may be eligible to submit form 1023-EZ.

Applying for State level tax exemption in New York:

To file for state income tax exemption in New York, you'll submit form CT-247.

To file for sale tax exemption, you'll submit form ST-119.2

As a nonprofit in New York, you may also be eligible for a property tax exemption.

Register for fundraising activities

Before your nonprofit does any fundraising activities in New York, it needs to register with the state, and renew this registration on an annual basis.

Nonprofits in any of the following sectors are exempt from this registration process:

  • Charities with less than $25,000 in yearly donations, that do not solicit a professional fundraiser

  • Religious charities

  • Hospitals

  • Historical societies

  • Volunteer firefighters

  • Volunteer Ambulance services

Exemption from fundraising activity transparency is a one time process online.

Other nonprofits can register for fundraising activities via this online portal 

Protecting your business in New York

Some recommended insurance policies for your New York startup are:

Business owners policy (BOP)

This type of insurance policy combines both business property insurance and business liability insurance.

This policy can protect business owners from theft, fire, loss of income, lawsuits and data breaches.

Commercial property insurance 

This policy protects your business furniture and inventory in the event of a fire and theft

General liability insurance 

A general liability insurance policy protects your business against reputational damage, property damage, personal injury and copyright infringement claims from any advertising.

Business income insurance 

This insurance policy supplements any lost income while your business recovers from any damage to its processes.

Workers compensation insurance

This will ensure your employees get compensated in a timely manner in the event of any work related injuries. 

Helpful resources

Business express

Business setup checklist generator and helpful business startup resources 

Department of State Division of Corporations, State records and UCC

Documentation for corporations

Business entity database

A database to search for business name availability. 

Small Business Development Center

This is a great resource for small business news, tips and advice, market research and industry-specific links.

Small Business Administration

The US Small Business Administration offers advice, advocacy and instruction for small businesses across the country.

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