By Catherine Li
Arguably, many believe New York City is one of the best cities to start a new business in. It's diverse and lucrative economy welcomes entrepreneurs and businesses alikes. But whether your business operates in the bustling city or the quieter countryside, protecting personal assets is an undeniable necessity in the state of New York. Read on for a more detailed step-by-step for incorporating in New York.
Steps for incorporating your business
- Choose a fitting business name. Picking the right name for your business can be a challenging task. It is crucial to choose a name that encompasses your business’ values and purposes. Customers should also be able to easily find the name of your business while the business functions are still easily translated. This way, customers can effectively connect your business with its goods/services. As well, it is important to run a state name check, which shows what names have already been taken in the desired state. Remember that New York law requires that limited liability companies (LLCs) and corporations should have identifiers, such as the abbreviation “LLC” to highlight the company’s formal incorporation status to the marketplace. Refer to the New York State Guide to find more about these naming requirements.
- Appoint or employ members/managers (LLCs) or directors (corporations)
- Your corporation requires at least one director.
- Directors are at least 18 years of age.
- Directors are not required to either be shareholders of the corporation or residents of New York - unless otherwise noted in the Certificate of Incorporation or bylaws of your state.
- LLCs should determine whether the members or managers manage the LLC.
- LLCs require one or more members/managers.
- one or more members/managers
- Members/managers have no age limitations..
- Members/managers do not have to have residence in New York to fulfill the requirement.
- Members/managers do not have to have their names and addresses listed in the Articles of Organization.
- File incorporation paperwork. Here, your Articles of Organization for LLCs or your Certificate of Incorporation for corporations need to be filed with the Department of State.
- Set up procedures and rules. To incorporate in New York, the state of New York mandates an operating agreement already in place. It can be initiated before filing the Articles of Organization, together with the Articles of Organization, or within 90 days after. Usually, the operating agreement establishes rules like: who manages the company, how it is managed, and how revenue and costs are allocated. You are not required however, to fill out the operating agreement with your state.
- Acquire any needed business permits or licenses. Licenses and permits are needed by most types of businesses to legally operate and meet government policies.
- Determine other information such as registrations or regulatory obligations. Other regulatory and tax obligations you should be aware of include: getting a Federal tax identification number (EIN) and registering for New York employment taxes. For more information, you can refer back to the New York State Tax Guide for New Businesses.
- Create your business’s banking account. Of course, keeping your personal finances separate from your business accounts is not only a practical idea, but should be a required practice to keep your personal assets separate from your business assets. To do so, you should open a bank account for your specific business. Most likely, you will need an EIN and your incorporation paperwork.
- File your Biennial Statement. Incorporating in New York requires LLCs and corporations to file a Biennial Statement. The documents outline all updated information on the company, which is then provided to the state. It must also be filed with the Department of Revenue every two years after the date your business started. The Biennial Statement is then a form issued by the Department of State.
Important requirements for maintaining an LLC in New York
New York is only one of few states that orders LLCs to release notices to the public of the company’s incorporation. The notice of the formation must be consecutively published for six weeks in an outlet designated by your specific country of your LLC’s legal address. Only after this requirement is fulfilled, a Certificate of Publication needs to be filed with the Department of State. Since this requirement can be costly, it’s beneficial to first research what will be required for your LLC and allocate your budget to what’s necessary.
Additional information about S corporations
When considering the factors of incorporating your business as either an LLC or corporation, it is essential to note that an S corporation has similar fundamental organization structure as a regular corporation. Like a partnership or an LLC, however, some tax advantages also apply to S corporations.
With the exception of capital gain taxes and passive income, an S-Corporation pays no federal income tax. The S-corporation’s tax election adopts pass-through taxation, which would avoid the burden of a double-taxation of C corporations. Shareholders also record their share of the S corporation’s profit or loss on their individual tax return. Specifically in New York, the “S” status must be reported to the IRS via Form 2554 within the first two months and 15 days of filling your Articles of Incorporation. There is also a fixed-dollar minimum corporate tax for S subject corporations.
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