Starting a business in New York is similar to most states and involves specific legal steps. You will need to decide the type of entity you want to be and how it will be taxed, which often takes the form of an election between S corporation and C Corporation tax status.
How to Start a Business in New York
Step 1: Choose the Right Business Idea
The right business idea is the foundation for your new business, and it should take into account several factors.
- First, you need to have a passion for what you’re going to do because it takes a lot of hard work to make a business successful.
- Be sure that your idea has a market, especially in today’s economy.
- You also need to be innovative and find ways to deliver value through your products or services.
- In addition, keep up with the latest technological developments because they will help you get ahead of your competitors.
- Even established companies need to innovate to succeed long-term in their industry or risk being left behind by nimble start-ups that give consumers everything they want faster and cheaper than before.
Step 2: Plan Your New York Business
A standard business plan contains all the basic information that potential investors and lenders will want to see, such as your mission statement and a summary of your products or services. You should also include:
- market research
- financial forecasts
- marketing strategies
- management team bios
- any other relevant data about your start-up.
In addition, you’ll need a strong understanding of what makes your business unique, as well as the legal requirements for getting started in New York.
Step 3: Get Funding
Before showing your business plan to potential investors, spend some time looking for other sources of start-up capital.
- If you have the right credit score and other qualifications, you might qualify for a small-business loan through your local bank or credit union.
- The SBA has established several programs that are designed specifically to help women, minorities, and veterans get funding for their businesses.
- You also might find an angel investor who is interested in supporting your idea based on his or her own experience in the industry.
- To increase your chances of finding funding, seek out other entrepreneurs who have successfully raised money for their companies and ask them how they did it.
- If you’re unable to raise sufficient funds from these sources, consider using online crowdfunding sites that allow entrepreneurs to post projects and request donations.
The more unique your business or product, the more likely it is that you’ll attract donors who are willing to contribute toward your success.
Step 4: Choose a Business Structure
When you file the appropriate paperwork with the New York State Department of State, you will need to choose a business structure. In general, this decision is between an LLC and a corporation, though there are several other possibilities as well, such as sole proprietorship or partnership. Each has unique benefits and detriments from a tax perspective that should factor into your decision-making process.
The easiest and least costly way to start a business is by operating as a sole proprietorship. This type of structure does not separate you from your business, so all its property and debts become yours. It’s up to you to pay the taxes on any profits that accrue – but there are some advantages too.
For example, you will only need official documentation if someone else invests in your company or if you want to hire employees instead of contracting out work.
A corporation separates your business from itself, allowing it to hold its own assets and incur liabilities such as loans without impacting your personal credit rating. In addition, the taxable income of a corporation flows through to shareholders’ individual returns, which means you can avoid double taxation (once at the corporate level and again when profits are paid out as dividends).
A limited liability company (LLC) is attractive to many start-ups because it combines some of the best aspects of corporations and sole proprietorships. For example, an LLC offers the limited liability features of a corporation without forcing you to incorporate them, which can result in expensive legal and filing fees.
On the other hand, this type of business does not allow tax benefits such as employee benefits or retirement plans.
When you partner with other entrepreneurs to launch a business, your responsibilities will depend on whether you are a general or limited partner. Like an LLC, a general partnership does not allow the tax benefits of incorporation – but all partners are responsible for the actions of their co-owners in both their professional and personal capacities.
A nonprofit is an organization that pursues a charitable, educational, or scientific goal as its primary purpose. Although any sort of entrepreneurial business can be structured as a nonprofit, this type of structure does not provide any tax benefits, and only the organization’s leaders control how profits are spent.
As you consider these options, bear in mind that there are pros and cons to each one.
1) For example, starting as a corporation could protect your assets from certain types of liability -but it will also require more work and expensive legal fees to get up and to run.
2) If forming a limited liability company (LLC) is financially out of reach for you right now, you might want to operate as a sole proprietorship until your business has more time to develop and grow.
3) You may also want to keep in mind that some business structures are only available for certain types of companies. For example, general partnerships are usually used by businesses that require more than one owner -but you can’t form a nonprofit as a corporation or LLC.
Step 5: Register Your New York BusinessName
When you’re ready to form a business entity, the next step is to choose and register a name. If you operate under your own surname or that of another business owner, talk to them before moving forward with registering your business’s name. It should be unique enough so other companies can’t pass off their products as yours by using a similar name.
The New York State Department of State (NYSDOS) offers an online search option for finding available names. The fee for reserving such a name is $20; however, it will expire if you do not file additional paperwork within 60 days after submitting payment. This often confuses people who try to preserve their company’s name online without completing the process by filing out and submitting Form D.
Step 6: Set up Business Banking, Credit Cards, and Accounting
In addition to establishing a business name, you’ll need to set up a business bank account and start obtaining the necessary licenses and permits. The State does not provide a “one-stop” licensing service. Instead, you will have to register with each agency or department that regulates your industry in order to get permission to operate your company.
To open a business checking account, you can either visit the local branch of any national bank or go through an online banking service such as ING Direct. It’s important that all tax deposits are made through this account, even if it is only used for depositing receipts during slow months. Otherwise, there could be serious consequences for both you and your company if you do not pay taxes on time.
Step 7: Get Insured
After you’ve decided what type of business entity to form and created a business checking account, it’s time to purchase the required insurance. In addition to general liability coverage, New York law requires that all companies have Worker’s Compensation Insurance.
If you hire employees in the near future, this will also protect your company from being sued for injuries on the job. Lastly, if any members of the public visit your place of business -whether they are customers or not- you need Public Liability Insurance to cover them in case they get hurt.
Step 8: Obtain Permits and Licenses
Although there are some federal licenses and permits that every business needs to operate, such as an Employer Identification Number (EIN) -the majority of the requirements for operating in New York fall into two categories. Most companies will need either a General Business or Limited Liability license or registration.
To begin obtaining these, visit the NYS Department of State website. Search the database by name, city, county, zip code, or other criteria to find out which businesses require you to register with them first before you open shop. New York also has many resources for starting your online business; if you plan on selling products or services over the Internet make sure it is allowed where you want to conduct business.
General Business Licenses
If your company operates as a partnership, corporation, or limited liability company, you will have to register with the New York Secretary of State’s office to obtain a General Business license. These licenses are obtained online and cost $40 to file.
Step 9: Hire Employees
Before hiring employees, visit the NYS Department of Labor website for information on how to do so. You can also find tax forms and publications that will help you learn about your responsibilities as an employer.
Once you’ve hired someone, make sure they fill out a new-hire packet with New York State’s Unemployment Insurance Division (UIC) within 20 days. This packet is available online or from any local unemployment office.
Employee taxes are paid either through deductions from each paycheck or through quarterly estimated payments -the process for determining what method is best for your business depends on its classification as a sole proprietorship, corporation, or LLC.
Register for New York State Employee Taxes
To begin withholding and calculating employee taxes, register with the state’s Department of Tax and Finance. Employees may also need to obtain a New York State Taxpayer Identification Number (NYS TIN).
You must file a final W-2 for each former employee by the end of January every year. For more information on this process, refer to your tax guide from your employer or download Publication 791 at http://www.tax.ny.gov/pdf/2011_791.pdf.
Step 10: Define Your Brand
You have a beautiful suite, an online storefront, and all of the equipment you could ever want. But is your brand as visible as it should be?
Creating a company logo is only the beginning. Make sure your business name is trademarked so that nobody can steal from you; if not, this process will take significantly longer if somebody tries to claim it.
Also consider printing professional business cards, letterhead, and envelopes. Start building up these supplies early because custom printed items typically take at least two weeks to arrive -four weeks or more for mailing envelopes with windows or specialty stock.
Step 11: Build Your Business Website
A key item of office equipment is your Internet connection. Besides using the Internet for marketing, you will need it to process credit card transactions and make changes to your eCommerce storefront
When choosing a web hosting company, select one that provides reliable services with customer support available 24/7. This way, if something goes wrong with your site -and it will- you can get help immediately instead of waiting for someone to respond to an email or phone call.
The design of your website should be clean, simple, and user-friendly; it should speak directly to customers in their language without confusing them with unnecessary graphics or text.
Step 12: Promote Your Business
To expand your company’s brand, you will need to promote it in various ways over the course of time.
Your online presence is critical; not only does it connect consumers to your business, but also allows them to interact with you directly through reviews and feedback.
Social media outlets like Facebook, Twitter, LinkedIn, and YouTube are free advertising platforms that can be used for both promotional purposes and customer service issues -like when someone orders the wrong product or wants an exchange.
You should regularly post updates about your company and post offers to your website -if you offer special promotions or discounts, for example, offer them on all of your online properties so every potential customer gets the message.
Pros and cons of starting a business in New York
- New York is a great place to start a business due to its strong employment growth, significant workforce diversity, and high median household income.
- It’s also one of 38 states that has no general corporate or individual income tax.
- Furthermore, it has an extensive network of national and regional distribution centers that can help retailers establish more than just a local presence.
- Lastly, the state’s business-friendly regulatory environment makes it very attractive for entrepreneurs.
- New York also has one of the highest tax burdens in the country according to the Tax Foundation; its effective property tax rate is on par with some states’ income tax rates
- The average sales tax rate in New York is 8.88 percent -the second highest in the U.S.- while its top marginal personal income tax rate was recently increased to number 12 nationwide at 8.82 percent (including both state and city levies).
How much does it cost to start a business in New York?
The initial financial requirement for starting a business in New York is $505.00. Other fees that may need to be paid when starting a business include:
- Business registration fee (varies by county and type of entity)
- Registered agent fee ($100 – $200 annually) -annual report filing fee ($10)
- EIN Application fee ($20 one-time payment per company, not per tax return filed under the EIN). This is necessary for setting up an online store, receiving credit card payments, etc. which can all be done with PayPal or Stripe; these are free services offered by most online credit card processors.
- County Clerk fees for filing your initial or amended certificate of formation and designation of a registered agent, which is an annual registration renewal not connected to your Federal EIN.
- Legal advice of a layer (if necessary).
Starting a business in New York City is an excellent option for those seeking to combine career advancement with entrepreneurial opportunities. But it should be noted that there are many small details that must be addressed before you can open your doors.
With the proper research, preparation and dedication, you will be on course to becoming one of the 65 percent of small businesses in New York who managed to survive their first year.