How to Start a Business in New York
Starting a business in New York is not for the faint of heart. For one, it's expensive. For another, the state imposes some pretty annoying requirements on new businesses, like the costly LLC publication requirement. Despite this, businesses in New York are thriving, thanks in part to the state's great incentives for small businesses. Here, we'll take you through every step you need to launch your New York business.
Ready to Start a Business in New York?Let's Get You Started
Pick a Business Structure
Name Your Business
File Formation Paperwork
Draft Internal Records
Get New York Business Licenses
Organize Your Money
Get Business Insurance
Understand Your Tax Burden
Build Your Business Website
File a New York Biennial Report
Apply for Trademarks
1. Pick a Business Structure
Sole proprietorships and general partnerships are easy to form because you don’t have to file business formation documents with the state. But they also have zero liability protection.
With a sole proprietorship or general partnership, assets like your car and house could be at risk if someone sues your business. But LLCs and corporations create a sort of shield that protects you and your personal assets. So, if you were to face legal action, creditors couldn’t seize your personal assets to satisfy business-related debts.
New York Limited Liability Company (LLC)
LLCs (limited liability companies) offer a less rigid organizational structure than corporations. There are also a few tax advantages to an LLC that you won’t find with a corporation. LLCs are a popular choice with small businesses because they are so versatile and can work with a variety of business models. To start a New York LLC, you’ll need to file paperwork with the Department of State’s Division of Corporations.
New York Corporation
Corporations have a less relaxed structure than LLCs. Corporations must follow specific record-keeping rules and adhere to a specific type of management structure. For example, shareholders must appoint a board of directors, who then elect officers to run the corporation. To form an New York corporation, file paperwork with the Division of Corporations.
Can an LLC be just one person?
Yes! A one-person LLC is called a single-member LLC. Single-member LLCs are one of the most common kinds of businesses in the country. For the most part, single-member LLCs are just like multi-member LLCs, but there are some slight differences in how they file taxes and protect personal assets.
What about a New York nonprofit?
In New York, you can start a New York nonprofit corporation if your business will exist to benefit the public or serve a group’s shared interests. To start a New York nonprofit corporation, you’ll have to file a Certificate of Incorporation for Domestic Not-for-Profit Corporations with the Division of Corporations. There’s also a $75 filing fee.
Want to learn more? Check out our Nonprofit Guide.
2. Name Your Business
Naming a business in New York comes with some rules. If you’re starting a general partnership or sole proprietorship, your business name is also your human name (unless you file for a DBA).
For an LLC or corporation, you’ll need a business name that meets the state of New York’s requirements. It must:
- Use an appropriate identifier, like “Incorporated” for a corporation or “LLC” for an LLC.
- Not use words that describe government agencies like “library” or “school.”
- Not use words that suggest a false business purpose, like “historical society” or “community renewal” if your company isn’t focused on either of those things.
- Not use words that describe a service that requires a professional license, like “attorney” or “insurance” if your business doesn’t provide professional services.
- Be unique in the state of New York.
Find out if your desired name is available in New York by searching the Corporation and Business Entity Database.
Can I reserve a business name in New York?
Yes. If you have a business name in mind but aren’t quite ready to form your business, you can reserve it for 60 days by filing an Application for Reservation of Name. You’ll then receive a Certificate of Reservation that you’ll need to attach to your formation documents once you’re ready to start your business.
What is a DBA?
A DBA is any name your business uses other than its legal name. If you’re a sole proprietor, your human name will also be the legal name of your business unless you get a DBA. For an LLC or corporation, your business’ legal name will be what you list on your formation paperwork.
To obtain a DBA, you must file a Certificate of Assumed Name with the New York Division of Corporations, State Records and Uniform Commercial Code.
What about trademarked names?
It’s a good idea to check with the US Patent and Trademark Office (USPTO) to make sure your business name hasn’t been trademarked by someone else. If it has, and you use it anyway, there’s a chance that the business could come after you for infringement.
3. File Formation Paperwork
If you’re a sole proprietor or part of a general partnership, you don’t need to file formation paperwork with the Division of Corporations. You will, however, need a Certificate of Assumed Name from your county if you want to operate using a DBA.
But to start a New York LLC or corporation, you’ll need to file paperwork with the New York Division of Corporations.
- To form a New York LLC, file New York Articles of Organization
- To start a New York corporation, file a New York Certificate of Incorporation
To fill out these forms, you’ll need to list a New York registered agent to handle your state and legal mail. Just by filing formation paperwork in New York, you’ll automatically get assigned one registered agent: The Secretary of State. If you want more personalized service, you can add another registered agent. Just make sure to provide your registered agent’s information when you initially file your paperwork.
The registered agent information you list on this form will become part of the public record. This means that the names and addresses you provide will be posted online for anyone to find.
Note: All LLCs, must publish notice of their formation within 120 days of filing with the state. The notice must run for six weeks in two newspapers—one daily and one weekly. Once the notice has completed its run, each newspaper should provide an Affidavit of Publication. Then, you’ll need to submit a Certificate of Publication (along with your affidavits) to the New York Department of State, Division of Corporations.
Read more about the New York publication requirement.
How can I keep my information off the public record?
The best way to keep your private information off the public record is to keep it off public documents altogether. To do that, you’ll need a registered agent who will list their address on this form instead of your own. (Hint: we can do that!)
What is a registered agent?
A registered agent is the person or entity who is responsible for receiving state and legal mail on behalf of your business. By law, your registered agent is required to have a physical address in New York where they’re present during standard business hours to accept documents. Since not all business owners stay in one place during the day, you may want to hire a registered agent to make life easier.
4. Draft Internal Records
So far in this guide, we’ve dealt with public forms that you’ve had to file with the New York Division of Corporations. Now, it’s time to organize your internal records. These are the documents your business will keep on record within your company.
Though these documents are internal, you’ll likely need to show them to third parties like the bank or—if you start a nonprofit—the IRS.
Here are the major internal documents you need to organize for LLCs and corporations:
New York LLC Operating Agreement
This is your LLC’s rule book. It defines how your LLC will do things like make decisions, distribute money, manage operations, and appoint officers. Your operating agreement plans for every big picture scenario your LLC is likely (or unlikely) to face, including dissolution.
Drafting an operating agreement is hard, and the internet is full of shabby templates that have been copy and pasted from who knows where. So we had our attorneys draft a New York LLC Operating Agreement template that you can use as a solid foundation.
New York Corporate Bylaws
Bylaws are the rules your corporation will adopt and follow internally. Bylaws detail how your corporation will appoint directors and officers, hold shareholder and board meetings, and handle emergencies, among other things. Unlike operating agreements, corporate bylaws are required by law in New York (see NY Stat § 4.06.601).
As with operating agreements, you can find plenty of bylaws templates online. But bylaws are pretty serious, so you don’t want to just use the first template you come across. Our attorneys drafted a New York Corporate Bylaws template you can use to get started.
Starting a nonprofit? We also have New York nonprofit bylaws.
5. Get New York Business Licenses
Many New York businesses will need both state and local licenses. The specifics depend on what kind of services your business offers. For example, a notary public must get licensed by the Secretary of State, while a real estate broker must apply to the Department of State.
You also need to get a Sales Tax Certificate of Authority from the state if your business is collecting sales tax. The New York Tax Department issues two kinds of Certificates of Authority: temporary and regular. A temporary certificate is an option only if you’ll be making taxable sales in the state for a maximum of two consecutive quarters in any 12-month period. If that time frame doesn’t apply to your business, you’ll need a regular certificate.
New York State Business License
There’s no blanket requirement for business licenses in New York. However, there’s a decent chance you will need a business license based on the services or product you offer and the specific location where you set up shop.
Professional Business Licenses
A professional business license is necessary if your trade requires a certain amount of training and education to do properly. Acupuncturists, dentists, and audiologists are some of the people who must get a professional business license in New York. A full list of professional services can be found in New York Statute Title 8. Licenses do not expire, although you are required to re-register your license with the state every three years, or every two years if you work in medicine.
Local Business Licenses
Many cities have their own licensing programs. For instance, if you want to sell hot dogs from a cart in Queens, you need a mobile food vending license for $50. You must also attend a food safety course at the NYC Health Academy after you submit your application.
Learn more about How to Get a Business License.
How do I get a New York business license?
You just have to do more paperwork. You’ll fill out an application that requests basic information about your business, like its name, entity type, and address. You can submit an application for a business license online or in person.
How much does it cost to get a New York state business license?
There’s a wide range of fees for getting a business license in New York. Obtaining a state real estate appraiser license costs $355 for the initial application, which is a bargain compared to getting an acupuncturist license. If you want to practice acupuncture in New York, you’ll have to pay $788.
How do I get a professional license in New York?
The process for applying for a license will vary depending on your service. Professional licenses are issued by the board that regulates your industry in New York.
How do I get a local business license?
Every borough or city has different requirements. In Albany, for example, getting a ice cream truck license requires you to fill out a form and return it to the Albany City Clerk’s office, plus pay a $750 application fee.
6. Organize Your Money
The liability protection you get from forming an LLC or corporation is only as strong as the separation between you and your business. At a minimum, you’ll need to open a bank account for your business. And if you’re going to hire employees, you’ll need to tackle payroll, too.
Open a Business Bank Account
To keep your business spending separate from your personal spending, you’ll need to open a business bank account. If you don’t, a court could find that your business is not actually separate from you, the owner, under the Alter Ego Doctrine. Also known as piercing the corporate veil, this is the outcome when a judge finds that a company is not a separate entity but rather an alter ego of the owner. If this ever happens, you could lose your limited liability status.
Opening a business bank account as a sole proprietor is important, too. Though sole proprietors and general partnerships have no limited liability status to protect, both will benefit from organizing their business finances come tax season.
How do you set up a business bank account?
Do I need a business bank account to accept credit card payments?
Probably. Payment processors require you to provide them with a bank account. This is where they’ll deposit funds from transactions. Most of the time, this needs to be a business bank account.
Some payment processors may let you get away with listing a personal bank account, but it’s not a great idea. Mixing your business finances with your personal finances erodes the separation between you and your business, weakening your liability protection. It also turns tax season into a nightmare.
Learn more about Payment Processing.
Set up Payroll
If you’re planning to hire employees or independent contractors, you need to set up payroll. To do so, you’ll need to:
- get an EIN
- register with the New York Department of Labor
- report information about newly hired employees to the Department of Taxation within 20 days of their hiring date
- figure out your income tax withholdings
- find your Employer Unemployment Insurance (UI) Contribution Rate
- determine whether you’re hiring employees or independent contractors
- prepare the forms your employees will fill out
- choose a payroll service or software
- decide on a payroll schedule
Setting up payroll in New York can be a tedious process, but a solid payroll service or software will automatically withhold payroll taxes, file state and federal returns on your behalf, and pay your employees either by check or direct deposit—whichever you choose.
What forms do my employees need to fill out?
Your new employees will need to fill out a W-4 to determine how much you’ll withhold and an I-9 to verify that the employee is eligible to work in the US.
What's the difference between an independent contractor and an employee?
It’s important to understand the difference between an independent contractor and an employee. That’s because for employees, you’ll need to withhold and pay income, social security, and Medicare taxes. Independent contractors pay these taxes on their own.
An independent contractor is self-employed—how they complete their work is not directly controlled by an employer. An independent contractor may perform the same kind of work for other businesses, and can do the work when and how they choose.
An employee, on the other hand, performs their work how and when their employer chooses.
If you’re unsure, you can file Form SS-8 with the IRS and let them decide.
How do I get a New York Employer Account Number?
You can register for an Employer Account Number via the New York Business Express online system. When you register, you’ll also receive your business’s Employer Unemployment Insurance (UI) Contribution rate, which you’ll need to set up payroll.
7. Get Business Insurance
Forming an LLC or corporation protects your personal assets. But if anything disastrous befalls your business—like a lawsuit, burglary, flood, or fire—your business is on the hook to pay. Business insurance can help cover the costs.
But do you really need business insurance? That depends on a few factors, as well as the level of risk you’re comfortable assuming.
Here’s a breakdown of the most commonly purchased business insurance:
Workers Compensation Insurance
Workers compensation insurance is required for most New York employees. However, there are exceptions. For instance, if the business is owned by one person without any employees and is not a corporation, you won’t need worker’s compensation insurance.
This covers the costs of claims against your business for injuries or damages to the property of others, like clients or customers. This includes medical expenses, legal fees, settlements, and judgments. Whether or not you need it depends on whether your business is likely to be sued and how many assets your business needs to protect. If it’s just you and your computer in your basement, you might feel comfortable skipping liability insurance. Or maybe you won’t. Beyond general liability insurance, you can purchase or add on more specific types, like professional, cyber, commercial, home-based business, or product liability insurance.
Do business owners need workers compensation insurance in New York?
If you are a business owner with no employees, you don’t need workers compensation insurance. However, it’s not a bad idea to make sure you’re covered in case of injury—especially since your personal insurance likely won’t cover anything that’s work related.
Do I need business insurance for my home-based business?
Probably. That’s because you can’t count on your homeowners’ or renters’ insurance policy to cover damages related to your business. Most insurance companies offer a home-based business insurance plan.
8. Understand Your Tax Burden
New York levies both a personal income tax and a sales tax. The income tax starts at 4% and tops out at 10.9%. The sales tax rate has a base of 4%, although local municipalities can and do asses additional sales taxes on top of the base rate.
There’s also a general corporate business income tax rate of 6.5%. If you have a business income of more than $5 million, that rate goes up to 7.25%.
- LLCs. Single-member LLC? By default, you’re taxed similar to a sole proprietor. More than one LLC owner? You’re taxed as a general partnership. Either way, your default tax status is “pass-through,” which means you don’t pay corporate taxes. Instead, your LLC’s owners report profits and losses on their personal tax returns. You’ll have to pay the 15.3% federal self-employment tax rate. An LLC can file paperwork with the IRS to be taxed as an S-Corp or C-Corp instead.
- Corporations. Corporations are taxed as C-Corps by default. This means that corporations pay the 21% federal corporate tax rate and the applicable New York corporate tax rate, which ranges from 6.5% to 7.25%.
To pay your federal taxes (and take a good deal of other steps required to start a business), you’ll need to get an Employer Identification Number (EIN). You can apply for one with the IRS or hire us to get one for you.
Do I need an EIN if I’m self-employed?
If you’re operating a sole proprietorship or single-member LLC that doesn’t employ anyone else and you don’t need to file excise or pension plan returns, you don’t legally need an EIN.
However, you can still get one—and you probably should. Otherwise, you’ll have to use your own social security number to do business. Plus, you’ll likely need an EIN to open a business bank account.
How do I get an EIN?
To get an EIN, you can either apply online or file form SS-4 by mail with the IRS. Getting an EIN is free.
Check out our guide to applying for an EIN.
What is an S-Corp?
An S-Corporation is a federal tax election. Registered business entities like LLCs and corporations start out with a default tax status, but can file paperwork with the IRS to be taxed as an S-Corp. Like LLCs, S-Corps are taxed as pass-through entities. Like corporations, S-Corps can make distributions that aren’t subject to the 15.3% self-employment tax.
Learn more about the S-Corp tax election.
What is a C-Corp?
A C-corporation is the default federal tax election assigned to corporations. Most corporations are taxed as C-Corps, but LLCs can also apply for C-Corp tax designation by filing paperwork with the IRS. C-corps file federal corporate income taxes and state corporate income taxes (in New York, the corporate tax rate ranges from 6.5% to 7.25%). C-corps can pay their shareholders in distributions, and the shareholders report those profits on their personal tax returns.
Learn more about the C-Corp tax election.
Local New York Business Taxes
New York assess a base sales tax rate of 4%. However, cities and counties in New York can also charge their own sales taxes. Let’s use New York City, as an example. The Big Apple stacks a 4.5% city sales tax on the state’s base rate of 4%. There’s also a Metropolitan Transportation Commuter District surcharge of 0.0375%. When you add it all up, New York City charges a total sales tax of 8.875%.
9. Build Your Business Website
If you want New Yorkers to find your business, they have to be able to find you online. This means you’ll need a website, a business email account, and social media accounts. Don’t worry if you’re not especially tech-savvy—you don’t have to be a web developer or an influencer to establish a robust online presence. You’ll just need the following:
- Domain name. Your domain is the address where your website will live. You’ll want a domain name that is short, unique, local, and—most importantly—available. If your domain is trademarked, you could face legal trouble.
- Domain registrar. Once you’ve decided on a domain name, you’ll want to register it with a domain registrar. Some domains are more expensive than others. Some domain registrars also offer hosting and most will provide you with a business email that includes your domain name (“[email protected]”).
- SSL certificate. An SSL certificate signals to your users that your website is secure. If your website will use forms—like a sign-up form or a “contact us” form—an SSL certificate is critical. But even if you don’t you use forms, you’ll still probably want one—it allows an encrypted connection, which means your users’ data is transported securely. There are several types of SSL certificates, and you can often get one through your domain registrar.
- Site design. The easiest option is to use a free website creation tool—there are a number of free options available. Most are easy even for a newcomer to use, with styles and built in templates. For a more custom design, you can hire a web designer to work on your website, but this will be much more expensive.
10. File a New York Biennial Report
Other states require corporations and LLCs to file annual reports, but New York only requires them every two years. The report must be filed by the end of the calendar month in which the business was originally formed. So, a business that formed on April 7, 2020 would need to file a biennial report by the end of April 2022.
Read more about how to file a New York Biennial Report.
What if I don't file a biennial report in New York?
If you fail to file your New York biennial report, you won’t be charged a late fee. However, you will lose your good standing with the state and risk administrative dissolution.
11. Apply for Trademarks
A trademark is a design, symbol, word, phrase—or any combination thereof—that represents a brand’s goods or services exclusively. Only some businesses register trademarks.
You can apply to register your trademark with the State of New York or federally with the U.S. Patent and Trademark Office (USPTO). Registering your trademark in New York is cheaper and easier than registering with the USPTO, but doing so only protects your trademark in New York.
You can only register a trademark once you’ve started using it (so slap it on that website you just made), and not all applications are approved. Trademark law is complex, and the strength of a trademark application (and the trademark itself) depends on many factors.
Our attorneys can review your application, offer advice, and prepare and submit the application for you—Check out our Trademark Service.
How do I register for a trademark in New York?
So you want to register a trademark in New York. To do that, file an Application to Register a Trademark and pay a $50 filing fee. The application should include three examples of how the mark is actually being used. You must register a trademark before your business is using it.
Once approved, the trademark is good for 10 years in the state of New York. After that, you’ll need to renew it. Finally, you should know registering a trademark in New York does nothing to protect your trademark on a national level.
Can I register a trademark before I use it?
No. But you can file an application with the USPTO under Intent-to-Use status. This gets your application in line before you’ve actually used the mark, which could be helpful if you’re worried someone else might register your mark before you’ve had a chance to use it.
For your trademark to become official, you’ll eventually need to show proof that you’re using it. An Intent-to-Use application buys you some time to do that.
Learn more about filing an Intent-to-Use Trademark.