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New York’s economy is the country’s third-largest, at more than $2 trillion, and the state is a hub for a variety of industries. Because small businesses make up the majority of businesses in New York, it’s a great place to launch a new venture.
“New York is a state with a strong economy with a mix of industries, a strong job market, and entrepreneurial cultures,” says Sandra Eberhard, president and CEO of Women’s Business Enterprise Council (WBEC) Metro New York and Greater DMV (which includes D.C., Maryland, and Virginia).
New York is fertile ground for new ventures, but starting a business there does require careful planning (and some paperwork).
Start a business in New York
- Choose a business idea
- Name your business
- Create a business plan
- Choose a business structure
- Register your business
- Get an employer identification number
- Obtain a business license and permits
- Examine insurance options in New York
- Fund your business
- Market your business
1. Choose a business idea
Before you embark on your entrepreneurship journey, make sure you have a solid business idea. In order to succeed, your product should fill a gap in the market and appeal to a specific audience.
Will your business be business-to-consumer (B2C) or business-to-business (B2B)? Will you sell products online, through a brick-and-mortar storefront, or both? In order to appeal to your target customers, conduct market research and study industry trends.
Once you have a general concept, assess your path to profitability. Figure out how much you need to sell in order to break even and then generate a healthy profit margin.
2. Name your business
Naming your business is one of the most important parts of starting a business in New York. Why? Your name represents your business, so you’ll want to choose something memorable, apt, and unique.
Considerations during the naming process include:
Is the name unique?
You can’t legally register your business with a name that’s already taken. When picking a name for your business, search your desired name in the Department of State Corporation and Business Entity Database to see if it’s available. If you’ve chosen a unique name but are still up in the air about launching your business, you can reserve your desired name for 60 days by filing a Certificate of Reservation with the New York Department of State.
Is the name trademarked?
If your business name is available at the state level, make sure no one has trademarked the name at the federal level, by doing a search on the US Patent and Trademark Office’s site.
Is the domain name available?
Find an available domain name that matches or represents your business name to build your web presence. Purchase and secure it as soon as possible before someone else snatches it up.
Does it include the correct business identifiers?
Your business name must include one of the following words or abbreviations: Incorporated, Inc., Corporation, Corp., Limited Liability Company, LLC, L.L.C., Limited, or Ltd. The application must be submitted with a $20 filing fee.
Do you want to use a DBA?
If you want to operate your business under a name other than its legal on-paper name (for instance, if you run a sole proprietorship or general partnership where the business name is your own name), you can file for a DBA (doing business as) name. This allows you to operate publicly under a trade name.
3. Create a business plan
Consider the business plan as the “big picture” strategy for your company. In physical form, it is a written document formally describing a business and can include these elements:
- Executive summary
- Detailed business description
- Listing of products and services
- Competitive analysis
- Financial outlook
- Production, operations, and staffing plans
- Marketing plans
Not only can a business plan attract investors, but creating one can also help business owners clarify their goals and strategies. Consider reviewing a few examples or using a template to get started.
If you’re creating a business plan for the first time, a mentor can help you navigate the process with ease.
“We offer training, mentorship, and networking opportunities to support business growth,” says Eberhard of WBEC Metro New York, which supports more than 1,800 businesses in the Metro New York tri-state area.
New York is ranked No. 1 by the 2024 Wells Fargo Impact of Women-Owned Businesses Report in supportive environments for women-owned businesses.
“All of this helps women-owned businesses meet the demands of a changing economy, employment, and revenue.”
4. Choose a business structure
When it’s time to dive into the legal world of incorporating your company, a first step is selecting your business type. Choose a legal structure that best fits for your new venture, since your business type affects factors like taxes and liabilities. The most common types of businesses are sole proprietorships, partnerships, corporations, and LLCs.
Sole proprietorship
Sole proprietorships are unincorporated businesses that offer no legal distinction between the company and the person who runs it. They’re the most straightforward business model to start and manage, but they come with the most personal risk. Since your sole proprietorship’s business income is considered personal income, you file it on your personal tax return. You are also personally responsible for any debts or obligations your business takes on, and you won’t be able to take on investors.
Partnership
Partnerships, which can be limited or general, are single businesses with two or more owners. In both taxation and liability, partnerships are treated the same as sole proprietorships. The primary difference is two or more owners share income and responsibilities in a partnership.
C corporation
C corporations (or C corps), which can be for-profit or not-for-profit, are legal entities unto themselves. They are the most difficult business type to form and manage but offer the most fundraising opportunities, and owners are largely free from liability.
C corps are subject to income taxes. The corporate tax rate in New York is 6.5% for small businesses that make $5 million or less per year; 7.25% for businesses that make more than that. Then, shareholders are also taxed for any income they receive from the business.
This double taxation (combined with extra paperwork and regulations) typically makes C corps an undesirable legal structure for many small businesses. However, they can be more suitable for larger, mature businesses that would benefit from having stock options. Unlike other types of businesses, C corporations can sell as much stock as they’d like, and shares are easily transferable.
Limited liability companies (LLC)
Limited liability companies (LLCs) combine the straightforward taxation method of partnerships and sole proprietorships with the liability protection of corporations. By default, LLCs are categorized as pass-through entities. This means that the business’s income passes through the LLC and to its members, so you avoid double taxation and include this money on your personal tax returns.
In the state of New York, LLCs may be subject to an annual filing fee, which ranges from $25 to $4,500, depending on your business’s gross income. As long as you follow protocols to keep your business and personal finances separate, LLCs offer their owners protection from debts or lawsuits their businesses face.
5. Register your business
If you’re operating as a sole proprietorship or general partnership, you’ll need to register your business with the New York State Tax Department. If creating a corporation or LLC for your business in New York, take the following steps:
File a Certificate of Incorporation or Articles of Organization
Your business is officially formed by filing a Certificate of Incorporation (for corporations) or Articles of Organization (for LLCs) with the New York Department of State.
You must provide your business’s name, contact information, and county, among other relevant information. You may draft your own document or use the one provided by the Department of State. You can file by mail or online. A Certificate of Incorporation is $125, and the Articles of Organization cost $200.
Appoint a registered agent
When you start a business in New York, you are required to name a registered agent for the purpose of receiving legal documents on behalf of the company. When your company is first formed, the New York Secretary of State will be your registered agent by default. Once incorporated, you can update your registered agent to any person, business, or agency with a New York address (not a P.O. box). Make sure someone at that location will be available to receive and respond to legal documents during business hours.
Adopt by-laws or an operating agreement
Although it’s not necessary to file them with the state, New York does legally require businesses to develop by-laws (for corporations) or an operating agreement (for LLCs), which are formally adopted rules for a business’s internal operations.
Review Tax Bulletin ST-175 (TB-ST-175) to determine whether you need to register for sales tax. If your goods are subject to sales taxes, then obtain a Certificate of Authority to start collecting. Do this at least 20 days before conducting business. If your business operates in multiple locations, one is required for each.
6. Get an employer identification number
To file federal tax returns—or even open a business bank account or obtain a business credit card—you must have an employer identification number, or EIN. This federal tax ID functions similarly to a personal Social Security number, but for a business.
The process is free and straightforward: Fill out the form on the IRS website to apply. An EIN is required for LLCs, corporations, and partnerships. However, the owner of a sole proprietorship may opt to use their Social Security number instead.
7. Obtain a business license and permits
To find out which licenses and permits apply to your business, use the state’s New York Business Express to create a customized business checklist for your new business. If your business requires Alcoholic Beverage On Premises Licenses (or something similar), you will be directed to follow the application process on the State Department’s website.
8. Examine insurance options in New York
Business insurance is an important safeguard against financial risk. When starting a business in New York, you may be required to purchase several different types of insurance, especially if you plan to hire employees. Insurance options include:
- Workers’ compensation insurance. Workers’ compensation, or workers’ comp, insurance is required insurance that covers your employees’ compensation in the case they sustain a workplace injury.
- General liability insurance. General liability insurance protects your business against claims involving reputational harm, bodily injury, and property damage.
- Professional liability insurance. If your business provides professional services or advice, professional liability insurance covers things like errors, omissions, and negligence in work performance.
- Property insurance. Whether you rent or own, property insurance can cover damages caused by theft, vandalism, or fires.
- Disability insurance. New York is one of five states (including Hawaii, Rhode Island, New Jersey, and California) that requires employers to provide disability benefits to employees for an illness or off-the-job injury. This often comes with paid family leave insurance as well.
- Health insurance. Under the Affordable Care Act, businesses with 50 or more employees must provide health insurance.
9. Fund your business
You’ve probably heard the saying, “You have to spend money to make money.”
Funding sources can include personal savings or bootstrapping to raise money from friends and family (consider signing a written agreement), crowdfunding, angel investors, and small business loans.
Keep in mind: Traditional small business loans through banks can be difficult to attain when just starting out. Still, there are programs available that offer payroll, inventory, and marketing funding—options with minimal paperwork and payment flexibility.
10. Market your business
Market your business by reaching out to customers across platforms, including Facebook, Instagram, and TikTok. You can employ several different types of interconnected marketing campaigns and strategies, including press releases, social media, search engine optimization (SEO), influencer marketing, partnerships, content marketing, billboards, print ads, and more.
With the right marketing strategy and business support, you can maximize your brand and scale your small business. WBEC Metro New York, for example, offers an invite-only ScaleIt program for women entrepreneurs to learn how to create customized marketing plans.
*This post is for information only. You are responsible for reviewing and using this information appropriately. This content doesn’t contain and isn’t meant to provide legal, tax, or business advice. Requirements are updated frequently and you should make sure to do your own research and reach out to professional legal, tax, and business advisers, as needed. Businesses outside of New York will have different steps and requirements. To sell products using the Shopify platform, you must comply with the laws of the jurisdiction of your business and your customers, the Shopify Terms of Service, the Shopify Acceptable Use Policy, and any other applicable policies.
Starting a business in New York FAQ
What are the requirements when starting a business in New York?
You must create an entity, which requires a registered agent with an address in the state of New York. You are also required to register to pay taxes, obtain any necessary licenses and permits, and get business insurance.
Do I need a business license to start a business in New York?
There is no general business license requirement in the state of New York, although some licenses and permits may be required depending on the type of business and its location. Use the New York Business Express new business custom checklist to determine what’s required for your business.
How much does a business license cost in New York?
What are the advantages of starting a business in New York?
New York has the country’s third-largest economy, with more than half of its workforce made up of small businesses. New York City is a major hub for a variety of different industries including finance, publishing, entertainment, food, and more. The state, and New York City in particular, also offers a diverse and well-educated workforce from which to hire.
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Credit: Original article published here.