How to start a business in New York
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:
Sales and marketing
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)
Child Care center
Fitness business (gym, martial arts, dancing)
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:
Limited Liability Company (LLC)
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.
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 register as an employer
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
If you plan to renovate your home to accommodate a home office, you'll need to file for a permit.
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
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:
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).
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
New partner admittance 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).
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:
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.
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.
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:
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 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:
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
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.
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.
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:
These include the following industries:
Athletic, agricultural horticultural, fraternal and social.
These include the following industries:
Educational, animal and children cruelty prevention
These include public operations performed by business corporations.
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:
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
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.
Business setup checklist generator and helpful business startup resources
Documentation for corporations
A database to search for business name availability.
This is a great resource for small business news, tips and advice, market research and industry-specific links.
The US Small Business Administration offers advice, advocacy and instruction for small businesses across the country.
Our own guide to launching your startup will walk you through every step of starting a business, from concept to execution.