New York City is heralded as one of the best cities to tap into when it comes to starting a business. Its rich and diverse economic landscape invites big businesses and entrepreneurs alike. But whether you are peddling your wares in Buffalo or New York City, protecting your personal assets should be at the top of your list as a small business owner in the state of New York. The following article outlines the steps for incorporating in the state of New York.
Steps to take when incorporating your business
- Select a business name. Choosing a name that's suitable for your business is not always an easy process. It's important that the chosen business name aligns with your business' mission and purpose. You also want to make sure your customers are able to easily find you while ensuring your business' function is not lost in translation. Customers should effortlessly make the connection to what services/products your business provides. Additionally, it is very important to conduct a state name check, which reveals if your preferred name is already taken in the desired state of incorporation. Keep in mind that New York law requires that corporations and limited liability companies (LLCs) need to have an identifier, such as the word "Corporation" or the abbreviation "LLC" to announce the company's formal incorporation status to the marketplace. Consult our New York State Guide to find out more about naming requirements for LLCs and corporations.
- Recruit and/or appoint members/managers (LLCs) or directors (corporations).
- A corporation must have at least one director.
- Directors must be at least 18 years old.
- Directors are not required to be residents of New York or shareholders of the corporation - unless otherwise noted in the Certificate of Incorporation or bylaws.
- LLCs should determine whether the LLC will be managed by the members or managers.
- LLCs must have one or more members/managers.
- Members/managers do not have to reside in New York to satisfy the requirement.
- There are no age limitations for members/managers.
- Names and addresses of members/managers do not have to be listed in the Articles of Organization.
- File the incorporation paperwork. A Certificate of Incorporation for corporations or Articles of Organization for LLCs need to be filed with the Department of State.
the rulesand procedures. The state of New York requires LLCs to have an operating agreement in place. It may be put in place before filing the Articles of Organization, in conjunction with filing the Articles of Organization or within 90 days after filing the Articles of Organization. Typically the operating agreement establishes protocol such as: how the company will be managed, how meetings will be conducted, and how profits and losses will be allocated. You are not required to file the operating agreement with the state.
- Obtain any required business licenses/permits. Permits and/or business licenses are required for most types of businesses to operate legally and meet government standards.
- Determine other regulatory obligations and registrations. Other
taxand regulatory obligations you should consider for your corporation or LLC include: obtaining a Federal tax identification number (EIN) and registering for New York employment taxes. Reference the New York State Tax Guide for New Businesses for helpful information. Business Owner's Toolkitalso serves as a valuable source for tax information for individual states.
- Open a bank account for your business. Keeping your business' finances separate from your personal accounts is not only a practical idea but required to show that you are keeping the assets of your business separate from your personal assets. To apply this practice early on, open a bank account for your LLC or corporation. You will most likely need an EIN and your incorporation paperwork.
- File a Biennial Statement. A Biennial Statement is a document that New York requires LLCs and corporations to file. It provides the state with updated information on the company. It must be filed with the Department of Revenue every two years after the date of formation. The Department of State issues a form for the Biennial Statement.
Other notable requirements for maintaining an LLC in New York
New York is one of only a few states that requires LLCs to publish
Additional information about S corporations
When weighing the factors of incorporating your business as a corporation or an LLC, it is important to note that an S corporation carries the same basic organizational structure as a regular corporation. However, some of the tax advantages of a partnership or an LLC apply to the S corporationas well.
An S corporationpays no federal income tax with the exception for tax on some capital gains and passive income. The S corporation's tax election adopts pass-through taxation - thereby sidestepping the double-taxation burden of C corporations. The shareholders report their share of the S corporation's profit or loss on their individual tax returns. To form an S corporation in New York, "S" status must be communicated to the IRS via Form 2553 within two months and 15 days of filing your Articles of Incorporation. No additional paperwork is necessary to obtain
Remember to also consult with your accountant or attorney to make the most educated decision in terms of setting up the legal entity that's right for you.