Just over 90 percent of all employees in New York City are employed by small businesses or startups—a larger percentage than in most other cities in the country. If you are considering starting your own company, it is important to familiarize yourself with the legal basics of company formation in New York. Tech and financial startups are flocking to New York City in record numbers, while manufacturing, especially in computers and other electronics, remains a strong force in Buffalo and upstate New York. Albany even had a record number of healthcare-related companies incorporate over the past five years. It’s no surprise that thousands of new businesses are registered with the NYS Department of Financial Service every year. Put in a request to schedule a free consultation with a Priori corporate lawyer in New York to get your company up and running.
Getting a Business Off the Ground in New York
A good idea isn’t enough to get a business going. Getting your business off the ground in New York requires planning before you ever deal with the legalities and logistics of running it.
Developing a Business Plan and Securing Financing
The first step in building a successful business is to make plans and finance those plans. Without a clear business plan, it’s almost impossible to successfully launch a business, no matter what your product ideas. A business plan helps you determine how you will overcome any difficulties and what you need to sustain your business to succeed. Some basic issues you will deal with include the “big idea” behind your business, target market research, strategies for market penetration and growth, and estimated costs and sources of funding.
After you have well-developed business plan, you need funding to put it in action. You can use your plan to solicit an investment of capital from outside sources, such as venture capital investors, angel investors, crowdsourcing, small business loans, and even grants. Even bootstrapping and borrowing from friends and family may help you launch your company.
Registering a New York Business Entity Name
Once your business has a plan, it needs a name. In order to use that name legally in New York—and in other states, you must register a New York business entity name. This requires a form and fee filed with the NYS Department of Financial Service. Make sure to check for its use and domain name availability at this time too, because it will be harder to change later. At this time, you also have the option of trademarking your company name and logo.
Incorporation in New York
The next step towards starting a business in New York is to incorporate. By registering as a legal entity, you get the benefits of legal recognition and a legal framework through which to organize your company and its operations. Not only will your business name be registered with the state of New York, but your personal liability will be limited in many cases.
The following are the most common ways small businesses incorporate in New York:
- C-Corps. C-Corps are traditional corporations with individual tax entities. To incorporate, file a Certificate of Incorporation with the NYS Department of State.
- S-Corps. S-Corps are structured much like C-Corps and registered through the same process with the Department of State. On the other hand, these corporations are taxed as pass-through entities and more limited in terms of investors and stock options.
- LLCs. LLCs are much more flexible corporate structures typically taxed as pass-through entities with no set requirements for their operating agreement. To incorporate, file Articles of Organization with the NYS Department of State.
- Limited Liability Partnerships. These partnerships are formed under state law, and commonly are used for real estate holdings or groups of professionals. To incorporate, file a Certificate of Limited Partnership with the Department of State.
- Sole Proprietorships and General Partnerships. While these do not limit your liability, they can be attractive options for certain professional freelance operations and other businesses. Unlike many other entities, these can be filed at the county level.
In New York, there are defined insurance requirements that every business owner must meet or expensive consequences. At the very least, every small business with even one employee in the state of New York must have unemployment insurance through the NYS Department of Labor and worker’s compensation through the NYS Insurance Fund or a self-certified private carrier. Depending on your company’s size, location within the state, and legal structure, you may also need to purchase disability and health insurance.
Insurance requirements of small businesses are not limited to employees either. You may want to protect your assets through rental or owner’s insurance as well. In certain neighborhoods of New York City and other large cities like Albany, this kind of property insurance may be required if you own real estate. It’s important to check local requirements and talk such issues over with a local New York insurance lawyer.
Getting Your Tax and Government IDs
If you do not pay your taxes properly from day one, you can find your business failing quickly. To do this, you need to file for tax and other government ID numbers. Federally, you’ll need to register for an Employer Identification Number (EIN) or Federal Tax Identification Number with the IRS to pay social security and corporate income taxes.
At the state level, you need to apply to the NYS Department of Taxation and Finance for a sales tax Certificate of Authority and a NY.gov ID. This will allow you to pay sales tax and other relevant state taxes as necessary, as well as use the online small business tax portal.
Acquiring Business Licenses in New York
Many businesses need certain licenses and permits to operate in their counties in New York. To find out which licenses may apply to you, you can use the questionnaire provided by the NY License Center. Then you can apply for those licenses and permits with your NY.gov ID. It also may help to discuss exactly which licenses you may need with a New York small business lawyer, as they can help you ensure full compliance and help file for possible federal licenses and permits as well.
Is there anything else I should know about starting a business in New York?
Starting your own business is a complicated subject, and it requires many legal and financial considerations. It would be impossible to detail them all here. If you have questions, it may help to discuss your concerns with a qualified New York small business lawyer.
Is New York a good place to have a startup?
In many circumstances, yes. There are many startups active and flourishing in New York. In fact, you can even operate tax-free for ten years in cities like Rochester, New York City, and Buffalo by partnering with a local university through START-UP NY. As Empire State Development President, CEO, and Commissioner Howard Zemsky describes it, “[Startups are] strengthening the state’s economy, stimulating growth and progress on our college campuses and creating thousands of new jobs for New Yorkers.” If you want to ensure incorporating in New York is right for you, however, it can help to discuss your options with a New York startup lawyer.