How to start a business in New York

Dreaming of starting a business but not sure how to do it? In our step-by-step 2020 guide we teach you how to launch your own business in New York.

11 вер. 2019 р. • 14 хвилина читання

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Everything you need to know to start your business in New York

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:

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:

Sole Proprietorships

Partnerships

C-Corporation

S-Corporation

Limited Liability Company (LLC)

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:

Apply online via the IRS website

here

Fill in

this form

and then send it by mail using

these instructions

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:

You must

Notify the State of all new hires by filling out a

New Hire Report

Validate the identity of all

new hires

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:

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).

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.

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:

New York Registered Agent

Northwest Registered Agent

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