What You Need to Know When Starting a Business in New York
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Starting a business in New York is a high-risk, high-reward venture. With its gross product of $1.6 trillion, a consistent 3-5 percent growth rate, and a population of nearly 20 million, opportunities abound. The U.S. Small Business Administration estimates that less than 2 percent of organizations are large corporations. That means 98 percent of small business entrepreneurs succeeded in New York with a new idea or a way to do something better and cheaper.
But starting a NY LLC can be complicated and extraordinarily competitive. Small businesses shuttered in New York at a slightly faster rate than they opened. Many of the startups that didn’t quite cut it in the Big Apple and other cities and towns across the state were not adequately prepared. That’s largely because visionaries need more than just a great idea. They need to know the procedural steps necessary to create an LLC.
Craft a Detailed Business Plan
One of the sometimes fatal faux pas that innovative thinkers make is leaving elements of their business plan in their heads. In all likelihood, you’ve come up with a new or better idea that could very well translate into substantial wealth. But it’s crucial to get the broad strokes and fine details down on paper. The process of drafting a document that defines the entity’s direction, goals, and offerings galvanized its viability. A detailed business plan that includes the following also helps others on your team understand decision-making and critical next steps.
- Write an Executive Summary Draft
- Create a Business Overview
- Identify Products and Services (in detail)
- Formulate and Articulate a Market Analysis
- Produce and Objective Analysis of Your Competition
- Develop a Refined Sales and Marketing Plan
- Outline How the Organization will be Managed
- Craft and Overview of Financial Probabilities
Once you’ve completed a draft of the business plan, circle back and adjust the Executive Summary. It’s not unusual for business minds to have epiphanies as they type out their thoughts.
Name Your Business for Success
A successful business name is not necessarily a matter of being trendy. It has to capture people’s imagination in a memorable fashion. To accomplish this feat, consider giving the LLC a name that seamlessly fits with the marketing and branding plans established in the executive summary. Thoughtfully consider whether you will couple it with a logo or use stand-out fonts and graphics to drive the name itself.
Before you run ahead with the exciting prospects of naming and branding the company, tap the brakes. You will need to conduct some due diligence to find out if your possible company names are available.
New York offers a Corporation and Business Entity Database that allows you to peruse the lengthy list of already-used business names. Given how many enterprises come and go in New York, you may want to pour a warm beverage while you run searches to find a suitable name that is not currently in use.
Secure an EIN and Register for Taxes in New York
Before you can move forward and form a company, you’ll need to first acquire an Employer Identification Number (EIN). Getting an EIN is not overly complicated. Visit the IRS website and click through to the page for Employer ID Numbers. It may come as something of a surprise, but the federal government lays out easy-to-follow instructions. It also has a page for Frequently Asked Questions (FAQs) to help clarify any sticking points.
With an EIN in hand, you may need to file for sales and excise tax reporting with the N.Y. Department of Taxation and Finance. This will depend on whether you plan to sell physical products or perform services. Visit the Department of Taxation website and click on Register for Sales Tax to determine what your obligations may entail before officially forming a company in the Empire State.
Choose a Business Type
New York State offers the same basic business structures as most. While some options differ significantly, others are only subtly distinct. For example, a sole proprietorship and a corporation are miles apart. But an S Corp and C Corp, not so much. These are commonly used structures used by small businesses in New York.
Sole Proprietorship
A sole proprietorship may be the best option if you plan to be an owner-operator. These entities are typically named after the person who launches the venture. You can also use a doing business as (DBA) name to put forward for customers to recognize. To establish a sole proprietorship in New York, you’ll need to file an Assumed Name Certificate with the county clerk where you plan to do business.
Entrepreneurs generally enjoy the simplicity of a sole proprietorship. The state doesn’t task you with filing extensive paperwork or articles of incorporation. However, taxes usually come straight out of the owner’s personal IRS filings.
Limited Partnership
When two or a small number of parties want to form a company, a limited partnership provides some benefits. Each partner is only liable for actions of the organization to the extent of their investment. If you own 25 percent and there’s a civil lawsuit filed against the operation, you could be held liable for up to 25 percent of the damages. Of course, business insurance typically mitigates any danger of being sued. Investors usually enjoy profits based on these exact percentages.
That being said, a limited partnership calls for filing a Certificate of Limited Partnership and a Certificate of Publication with the New York Department of State. Like the sole proprietorship, taxes typically are paid from personal IRS filings.
General Partnership
A general partnership is very similar to a limited partnership. Taxes, liabilities, and profitability are handled in basically the same fashion. What’s different about a general partnership is the parties do not necessarily need to file with the New York Department of State. Instead, the partners file a Certificate of Assumed Name with the county clerk where they do business. In that regard, it mirrors a sole proprietorship.
Limited Liability Company, aka LLC
Although starting a NY LLC can be complicated, it tends to be the most popular business structure for startups. To create an LLC, you will be required to file Articles of Incorporation with the N.Y. Department of State. Having a detailed operating agreement is not mandated by the state. However, having one in place is generally considered prudent.
If your LLC has multiple members, you can elect to file with the IRS as an association or partnership. This essentially means the tax liability doesn’t flow through your return. An LLC with only one member has the option of employing an association tax structure or filing as an entity separate and distinct from its members.
These elements make the LLC attractive to new ventures because it insulates partners, or the single owner, from personal liability. If something should go awry, your personal assets are protected.
It may prove advantageous to form a corporation, particularly if you plan to employ a significant workforce and allow multiple investors to purchase shares. A corporation creates a wall between the actions of the organization and its owners. The business pays separate taxes, and profits may be doled out as dividends on a regular basis. To form a corporation in New York State, file a Certificate of Incorporation with the N.Y. Department of State. You will likely need to declare a registered agent as well.
Appoint a Registered Agent in New York
A registered agent serves as the primary point of contact for government agencies. The individual must possess a physical address and provide the state with actionable contact information. Official documents will be sent to the address — be it an office, home, or P.O. Box — and the person is expected to handle any service of process paperwork. The person must be over 18 years old and be listed in the LLC filing. Failing to file a registered agent in New York State can have serious consequences.
Create An LLC To-Do Checklist
Once you’ve completed the business formation process, there will be plenty of seemingly minor details to address. It may prove helpful to write out the list of tasks or search the internet for a comprehensive N.Y. business formation checklist. These are items to keep in mind as you get the business off the ground.
- Open a Business Checking Account
- Apply for A Business Credit Card
- Mark Your Calendar to Check on Biennial Reporting Fees
- Schedule Sales Tax Payments
- Review Any Payroll or Employer Tax Dates
- Follow Up on Applicable Permits and Licenses
- Take Out Business Liability Insurance
Depending on the type of operation you start, there may be other critical details to account for as well. Include them in the checklist to ensure they don’t get lost in the proverbial shuffle. Starting a NY LLC can be complicated, but if you take a proactive approach to managing the details, you can turn your ideas into a lucrative business.
Sean Michael is a writer who focuses on innovation and how science and technology intersect with industry, technology Wordpress, VMware Salesforce, And Application tech. TechCrunch Europas shortlisted her for the best tech journalist award. She enjoys finding stories that open people's eyes. She graduated from the University of California.
