You have a great business idea, and you want to turn it into a reality. You’re thinking about how to form a corporation in New York so that you can build your business without the day-to-day anxiety and headache of worrying about liability.
To help you along this journey, we’ve put together this post on what it means to be an LLC in NY and how to form one as well as information on NY LLCs, the advantages of becoming an LLC in NY, and more.
Forming a New York Corporation is Easy
A majority of states require you to jump through a number of hoops before being able to form a corporation. Not in New York. There’s no minimum number of shareholders needed to form a NY Corporation.
You don’t have to hold annual meetings or record every single detail of the operation in corporate minutes. And there’s no state filing fee either. Simply notify the Department of State of your intention to form a corporation and pay an annual fee, and you’re in business.
Why People Form Corporations in NY
The reasons why people form New York corporations are varied. Businesses looking to expand generally find it beneficial to have limited liability protection. They’ll file for incorporation in NY because it’s straightforward, low cost, and provides them with the liability protection they need–all without requiring them to maintain extensive records or hold regular corporate meetings.
What Type of Corporation Should I Form?
New York offers three types of corporations: C, S, and LLC. Which type you choose is primarily going to be determined by what type of business you’re running.
C corporation offers the most protection to shareholders. Shareholders can be held liable for corporate debts, but all profits and losses are passed through to the shareholders.
S corporations offer limited liability protection to shareholders. S corporation income is taxed at the shareholder level, not at the corporate level. That means that shareholders must pay taxes on their share of the corporation’s income, as well as any pass-through payments they receive from the company.
LLCs are designed to shield the owner from personal liability for business debts. Because of this, most small business owners choose to form an LLC in New York.
Process of forming an LLC in NY
There are two ways to establish a NY Limited Liability Company. The first is by filing Articles of Organization with the New York Department of State. This is done by completing a form, paying a modest fee, and waiting for the corporation to be officially formed.
The second way to form an LLC in NY is by filing what’s called an Application for Reservation with the Department of State. This entails filing documents stating your intention to form an LLC, and then waiting until your name is posted on their website as being reserved for use.
Step 1: Create a Name for Your NYS Corporation
The first step in forming a company in New York is to come up with a name. You want something that’s not too generic, but also not too unique. For instance, your business could be easily confused with another company if your names are similar.
- The name of the corporation must be distinguishable from other corporate names and reserved names.
- The name must end with “corporation”, “incorporated”, “limited” or an abbreviation of one of those words.
Step 2: Choose a New York Registered Agent
Once you’ve chosen a name for your company, it’s time to choose a NY registered agent in that name. This is the person who will receive legal documents on behalf of the company and keep track of their information, usually through a NY corporation filing.
How to choose the registered agent service?
- The registered agent must be a NY resident for at least six months.
- The agent must sign the application form and affirm that they have signed a waiver of liability form that your company is required to sign.
Step 3: Choose Your New York Corporation’s Initial Directors
The next and most important step in forming a corporation is choosing your company’s initial directors. An initial board of directors must be created within 30 days of forming your company. They’re then responsible for appointing the remaining board members and are also responsible for holding meetings and signing all corporate documents on behalf of the business.
Step 4: File a Certificate of Incorporation NY
Once your initial board of directors has been selected, you must file a NY corporation certificate of incorporation with the state’s Department of State, Division of Corporations. This process involves filing a document stating that you are the official representative for your new business as well as paying a filing fee. Department of State, Division of Corporations can be found
Step 5: Remain Registered in New York
Once the certificate of incorporation form is filed with the state, it must be renewed every three years to remain active. If you don’t want to renew, you can simply file for “abandonment” and dissolve your company.
Set Up a Corporate Records Book
According to NY state law, all corporations must keep a corporate records book that contains the following information:
- The name and street address of the corporation
- The names and addresses of all directors and officers on the board
- The names and addresses of all agents authorized to accept service of process on behalf of the company
However, if your corporation has only one shareholder, you don’t have to keep a corporate records book. All you have to do is file an annual report with the state.
Prepare Corporate Bylaws for Your New York Corporation
Bylaws are essentially the “rules” for running your business corporation. They’ll outline the duties of each board member, how to hold meetings and what types of recordkeeping your company must keep.
Bylaws aren’t required in NY–it’s up to you whether you want to create them or not.
Conduct Your First Board of Directors Meeting
The first step in running a NY corporation is conducting a board of directors meeting. Simply make sure that you have all agreed to the bylaws and attend the meeting.
The official way to establish control and ownership of your company is through the replacement of board members as necessary. You’ll have to authenticate the minutes of your first shareholder meeting and file the minutes with the state’s Corporations Department.
After that, all you have to do is formally notify each member of your company of their appointment. You can accomplish this by sending them a letter or email announcing their appointment.
Hire an Attorney for Your NY Corporation
In order to stay in New York business, forming a company in New York requires the hiring of an attorney. However, this doesn’t mean that it’s necessary to hire an attorney well before your first day is up. In fact, in many instances, hiring an attorney after your company starts can be prohibitively costly and unnecessary.
Even though a new company doesn’t need to hire a lawyer immediately, doing so shortly after incorporation is probably a good idea. This will allow you to better prepare for the legalities of your business and make sure that you’re on the right side of the law every step of the way.
Get an EIN
One of the first things that you’ll need to do is get an EIN for your new company. This is short for an “Employer Identification Number,” and it’s simply a number that’s assigned to your company by the federal government. All companies in the U.S., with or without employees, must obtain an EIN from the IRS and should do so as soon as possible.
This is achieved by filing Form SS-4 and mailing it to the appropriate IRS address. You’ll need to include your name, your business’ name, your mailing home address, and the type of activity that you will be conducting in the U.S.
The SS-4 form can be sent to the IRS either via a commercial depository institution (such as a bank) or directly via the Internet. If you choose to send it by mail, you must follow specific instructions on how to complete it.
As soon as your EIN has been assigned, you can start filing all of the business documents that you will need with the state’s Department of State.
Open a Bank Account For Your New York Corporation
After you have received your EIN and things are progressing smoothly, it’s time to open a business bank account for your corporation. You should contact a local bank and ask them to set up your business with an account number. This way you will be able to accept payments for all of your new business ventures in an organized manner.
Having a bank account set up will also allow your corporation to track revenue, maintain financial records and pay its vendors accordingly.
Establish and Build Your Business Credit Score
As soon as you begin building your business credit score, you will be able to obtain larger loans with less hassle. This is because the banks that lend you money will look at your business’s credit score before making a decision on whether to give you a loan.
This is why your company should get its credit score on file with Equifax, Experian, and TransUnion shortly after incorporation. It can be done online by going to the respective companies’ websites and providing your personal information.
There are a couple of things to note about building your company’s credit score.
- The process will take time–at least a few months. However, if you set up your business correctly and do things the right way, it will be worth the wait.
- You should be aware that each credit reporting government agency may see different information on your file. This is because they’ll use different criteria when creating your company’s credit score.
For example, some agencies will look at how many lines of credit that you have available, while others will look at your company’s average credit card debt.
While this may seem like a lot of information to provide at once, it’s important to do so as soon as you can.
Accounting For Your Corporation
The first thing that you’ll need to do after you’ve established your business credit score and opened an account at a local bank is to start keeping records. Not only will this help you keep track of your business’s finances, but it will also allow you to easily file your corporate tax returns with the state when the time comes.
Here are some things that every corporation should keep:
- Cash Books–this chronicles the company’s operating expenses, notes on sales and transactions with vendors as well as sales tax deposits.
- Bank Deposits and Credits–this will show the company’s bank account balances.
- Employee Payroll Record–accounts for the hours that your employees work, as well as taxes and other benefits.
- General Journal Accounts–this records all cash receipts and disbursements including the cost of goods sold.
These are just a few of the records that you will have to keep for your corporation. As your business grows, so should your bookkeeping system and reporting methods.
Research Business License Requirements
Before you begin working on your business’s structure, you should first research your state’s requirements and regulations concerning the type of business that you want to operate. This will save you a lot of time and money once the company is up and running.
Many states have different requirements for corporations and LLCs, but most still require similar standards such as an EIN number, annual reports, and business licenses.
Some states may also require that certain records be kept on file at local government offices such as the New York Secretary of State or a County Clerk.
Licenses and Permits That You Might Need:
- A Tax Permit
- Employee Lease
- Business License
- Business Registration
- Business Inspection Registration
The first step in the process is to get a tax permit, which is required at both the state and city levels for all corporations and LLCs. This will allow you to get licenses and permits, such as health department certificates for your business’s kitchen, electrical permits, etc. You should do this before you start your business, since this may be difficult to do after the fact.
Once you’ve purchased your business’ licenses and permits, you will need to inventory all of the company’s equipment and list its contents. This is usually done by taking photos of each item and listing its serial numbers on a separate piece of paper.
Once you have this information, you should also complete an inventory form that includes both physical and non-physical items.
There are many other permits and licenses that your new business may need in the future. If you’re unsure about the requirements in your state, you should talk to your county clerk’s office.
Documents for a New York State Business License
In order to obtain a business license for your corporation, you’ll need to complete a number of different forms.
In New York State, this includes the Articles of Organization, the Business Registration Application, and the Business Certificate. All of these documents can be filed online or by mail. The state’s website also provides detailed instructions on how to fill each form out properly and where to send it after it’s been completed.
The state taxes that you’ll have to pay once your business has been approved will be calculated by weighing all of the corporation’s assets as well as its income. Income will be taxed at a maximum rate of 8.62%, while corporations with assets exceeding $250,000 will be taxed at a rate of 0.1187%.
Have a Professional Service Form Your New York Corporation For You
While you can do all of these things yourself, it’s much more convenient to have a professional service take care of them for you.
There are many different types of services that will be able to set up your company for you. Some charge an upfront state fee while others charge a monthly retainer. You’ll want to find one that is affordable and comfortable with your business’ operations and structure. If you find a service that has experience setting up corporations in your area, that can be very helpful as well.
One of the best ones is ZenBusiness, which provides free consultations about the business structure that is right for you. They can help you fill out all of the necessary documents, set up your bank account, and help you get a business license from the state.
If you’re interested in having them do all of this for you, they’ll contact you to discuss your needs and set up an appointment. Their fee schedule is very simple and straightforward and it won’t change whether they file your documents by mail or electronically.
You can get started with your corporation today. Visit ZenBusinessCorporation.com and get the help that you need to start your business today!
The Benefits of New York State Incorporation
- Protection against liability for claims made by customers or their heirs
- Protection for assets and business assets from creditors
- Protection of the state’s constitution and federal law in any legal disputes with any of your company’s employees
- For protection from creditors, tax deductions, and education benefits; providing a shield against liens for employee compensation
- Property and liability protection to the corporation
- A company name, which must be later used for all written material and legal matters; this includes checks, credit cards, and anything that specifies the name of the organization
- Compliance with federal tax laws
- Legal and corporate name recognition in the state, business partners (such as office spaces, etc.), and customers
There are many benefits to incorporating as well as meeting all of the requirements for your state’s corporation laws.
How Much Does It Cost to Incorporate in New York?
This all depends on the type of corporation that you’re searching for. The process can become extremely complicated, which is why it’s best to consult with a professional.
In general, you’ll have to pay anywhere from $100-$600 to incorporate your organization. However, this does not include the costs of getting a business license or completing any papers with local government offices.
With this in mind, it’s best to contact a professional for assistance with the process. They will be able to explain each step and give you suggestions for what will be most beneficial for your new business.
How long does it take to incorporate a business in New York?
As long as you meet all of the necessary requirements and complete all of the necessary paperwork from a professional service provider, there is no time limit for incorporation. However, you should finish the process as quickly as possible to ensure that you comply with federal tax laws.
New York LLC Tax and Fee Requirements
The federal and state taxes that your LLC will have to pay will be calculated by weighing each of the LLC’s assets and its income.
The LLC will be taxed as a partnership at the federal level, but it will be taxed as a business entity at the state level and delved into accordingly.
In New York State, this means that although an LLC isn’t required to file a tax return, they’ll still have to pay personal property taxes on their equipment or vehicles.
To avoid this, you can set up an automatic depreciating asset account for each of your business’s vehicles. You can also establish a separate checking account for the company’s general operating expenses.
Once the LLC has filed all of its tax requirements, it will be able to make tax-deductible contributions to various charities or other organizations. These contributions are often referred to as “donations” and can often amount to thousands of dollars per year.
It’s also important to note that LLCs are not required to pay any state taxes, which is another major benefit.
How to get consent from the Tax Department
The Tax Department will often request proof of consent from your LLC when it has to file a tax return.
This is because the state is interested in ensuring that there are no hidden LLC members or that there aren’t any service providers that the company may have paid a percentage of its income to. If there are, these persons may be receiving income tax credits for which they would be eligible.
The Tax Department will often contact your business about this within thirty days of mailing out its form for the filing season. If there are any problems with your LLC’s tax documentation, the department will send you a “Notice of Deficiency” within 45 days.
If this notice isn’t resolved within 90 days of receiving it, you’ll have to pay a penalty for late payment. The amount of this penalty will be based on the state’s maximum allowable interest rate, which is currently frozen at 5%.
Do Corporations Have Yearly Filings?
The state of New York only requires your LLC to file a tax return each spring. This is because there are no other federal or state taxes that you’ll be required to pay on your business.
But, you’re still required to report all of the LLC’s income and losses for the previous year on its tax return.
This means that if your LLC made more than $5,000 in profit in any given calendar year, then it will have to file an annual Form 1120 at the end of that same calendar year.
With this in mind, it’s best to get an accountant or a business advisor to help you with your returns.
You’ll also have to submit a tax return if you have any specific circumstances to report, such as the loss of any property that is worth more than $500. This includes stolen vehicles or any other property that has been lost, damaged, or destroyed due to natural disasters.
Can a Non-Citizen Start a Corporation in the USA?
A non-resident alien can’t incorporate in New York. However, a non-resident can form a limited liability company in the same way as a resident alien. Alternatively, they can still be able to establish the organization as an S and C corporation.
To do this, you’ll have to file Form 6198 at the New York State Department of Tax and Finance. For this reason, it’s best to hire a professional who is well versed in setting up LLCs in New York State.
You’ll also need to keep in mind that when you form an LLC in New York, you’ll have to submit a separate certificate of organization with the Secretary of State’s Office.
A non-resident alien’s affidavits of good standing will be accepted by the state for this certificate. But, if you want to form a corporation instead of an LLC, then these affidavits will not be accepted as adequate evidence.
This is why you’ll need to get an apostille from the U.S. State Department to have your business documentation accepted in New York State.
How to Get a New York Certificate of Good Standing
If you want a New York State Certificate of Good Standing from the Secretary of State’s office, then you will need to request one before your LLC is incorporated.
The state offers this document for free on the internet. You’ll simply need to fill in the necessary information and upload a copy of your paperwork and any other forms that the state requires.
You can request your certificate via email, telephone, or by mail.
Typically, it can take up to 10 business days for a response from the office once you’ve made an appointment.
New York biennial
If you want to incorporate as an LLC in New York, then you’ll need to file for biennial incorporation. This is because the LLCs will be taxed as a partnership at the federal level, but they will be taxed as business entities at the state level. This means that while you’ll have to submit a New York state tax return, there won’t be any other forms that you’ll have to submit.
The state of New York has an interesting history that revolves around its incorporation laws. As a result, many people have moved to the state, creating countless businesses and organizations here.
This article provides a short overview of the major advantages of incorporating in New York State, such as a flat tax and no minimum requirements for LLC members.
There are many benefits to incorporating with a business service provider in New York State. This is because you will save on fees that you would otherwise have to pay for filing and other administrative requirements by doing it yourself.