How to Start an S-Corp in New York

New York, popularly known as The Empire State, offers a bunch of benefits for business owners, especially the state capital Albany has a lot to offer to the rising entrepreneurs in the state. If you want to start a business in New York, you must choose an appropriate corporate structure. You can have a corporation or a sole proprietorship or set up an LLC in New York. There are a few guidelines that you should be aware of when it comes to starting an S-Corporation. In New York, S-Corporation is businesses’ most common corporate structure, especially start-ups. It was developed in order to give companies limited liability protection while preserving the advantages of being a distinct legal organization.

In this article, you will learn about how to start an s-corporation in New York. You will also learn whether an s-corporate business structure suits your business. Please read all the points carefully before starting your business in New York.

On this page, you’ll learn about the following:

What is an S-Corp in New York?
- Limitation and Requirements of S-Corp in New York
How to Start an S-Corporation in New York?
Advantages of Starting an S-Corporation in New York
FAQs

What is an S-Corp in New York?

An S corporation (S-corp) is not a type of corporate entity, unlike a limited liability company (LLC) or other business structures. It’s a tax classification that might result in significant financial savings for both corporations and LLCs but in different ways. S-corp is similar to LLC, except that the IRS treats it as a corporation for tax purposes.

If you want an S corp status for your business, you can always form an LLC to protect your personal assets from business debts. It takes some basic steps to have a successful s-corporation in New York. S-Corps do pay corporate income taxes, but they are still treated as disregarded companies for federal tax purposes.

S-corps pay corporate taxes that LLCs do not have to pay. If you want to have an S-corp status, then we would recommend you have an LLC instead. This will protect your personal assets from your business liabilities and you don’t have to pay any corporate taxes.
–LLCBuddy Editorial Team

Limitation and Requirements of S-Corp in New York

As you have decided to have an S-Corp structure for your business, you must know the limitations and requirements to qualify for S-Corp status. We have listed some important points to consider following for your reference-

Be a domestic corporation.
Not be an ineligible corporation, such as specific financial institutions, insurance providers, or domestic corporations engaged in overseas sales.
Have just one type of stock.
Have a maximum of 100 shareholders or members.
Have only permitted individuals, certain trusts, and estates as stockholders or members.

If you are qualified for the limitations and requirements, you can apply for an S-Corp in New York.

How to Start an S-Corporation in New York?

To create S-Corp in New York, you must follow the below guidelines that include forming a business name, hiring a Resident Agent, filing your Articles of Organization, creating an operating agreement in New York, requesting an EIN, filing a form 2553.

Step 1: Register a Business Name in New York

After you have decided on the idea to start an S-Corp in New York, deciding the name for your corporation is significant. Legal procedures should be taken into account when choosing your partnership name. Choose a business name that will enable you to develop a strong brand identity.

If you want to set up an LLC, there is a complete guide on New York LLC name guidelines for a proper LLC name. Here are some guidelines you must follow while naming your S-corp.

Avoid profanities
The name should be available, and no other entity should have the same name in New York.
Limit of restricted words that need a license in New York, for example, doctors, attorneys, etc.
Do not use a business name that sounds like a government agency or entity (like “police,” “county,” and “state”)

Step 2: Hiring the New York Resident Agent

The next step in starting an S-corp in New York is hiring a New York Resident Agent, a person that accepts legal paperwork on behalf of your business. This person or business will receive important tax forms, legal documents (such as subpoenas), all notices of lawsuits, and other official government correspondence in New York. Forming an LLC and an S-corp will be easier if you have Resident Agent in New York.

Step 3: File Your New York Articles of Organization

The Articles of Organization is an important document to start your limited liability company (LLC). New York Articles of Organization is a simple document that contains the business name and address as well as the name and address of the person who received lawsuits on behalf of the organization. In order for the “Articles of Organization” to be filed, you need to pay a filing fee to the state. In New York, the filing fee is $200 (by mail and online).

In California, along with the Articles of Organization, you must send the Statement of Information to file your company. The statement of information is a mandatory document in California, but other states do not have this document.

Step 4: Creating an Operating Agreement in New York

After you have filed your Articles of Organization in New York, the next step is to create an LLC operating agreement in New York. The New York LLC operating agreement is essential and necessary since it will cover your corporation’s important documentation and rules. The operating agreements usually include the following-

Article I: Organization
Article II: Management and Voting
Article III: Capital Contributions
Article IV: Distributions
Article V: Membership Changes
Article VI: Dissolution

After creating the LLC operating agreement, you can benefit in several ways since it will discuss how decisions for the business will be made, including management and member voting structure. For more details about how an operating agreement works, please check Operating Agreement.

Step 5: Request for EIN in New York

After documenting the operating agreement, you should get or request an Employer Identification Number (EIN). An EIN will serve as the tax ID for your general partnership. EIN can be obtained from the Internal Revenue Service (IRS). It is a 9-digit number similar to Social Security Number. EIN, however, is distinct from SSN. It is only used for business-related activities, particularly for submitting general taxes. The form must be completed and uploaded to the IRS website.

The application of an EIN in New York can be through the following:

Apply Online- You can apply for EIN online, the most desirable and fastest method for users.
Apply by Fax- Another method of obtaining EIN is to fax Form SS-4 (PDF) after entering all the correct information to (855) 641-6935.
Apply by Mail- The EIN application Form SS-4 can be filed via mail. The processing time frame to receive the mail is 4 weeks.
Apply by Telephone-International Applicants – International applicants may call 267-941-1099 (not a toll-free number) from 6 a.m. to 11 p.m. (Eastern Time) Monday through Friday to obtain their EIN.

If you would like to be assisted in getting an EIN in the Internal Revenue Service, we can get your EIN for you. Our EIN service is quick and hassle-free. For more details about EIN for your business, check why you need EIN.

Step 6: File Form 2553 for Your S-Corp Business in New York

Once you have obtained your EIN and Articles of Organization to form an S-Corp, you must file Form 2553, Election by a Small Business Corporation, to apply for S-corp status. Filing a form 2553 should be done 75 days after the formation of your S-Corp, or not more than 75 days after the beginning of the tax year in which the election is to take effect.

If your LLS-Corp has passed the deadline of 75 days, you must also file Form 8832, Entity Classification Election, in order to opt to be taxed as a corporation. Then you would send Form 2553 and Form 8832 jointly by certified mail from the USPS. In New York, you can send your form 2553 to the Department of the Treasury Internal Revenue Service Center – Kansas City, MO 64999 Fax: 855-887-7734.

Advantages of Starting an S-Corporation in New York

Filing an S-Corp in New York has numerous benefits and advantages.

Writing Off Losses: With S-corp, owners can deduct business losses from their individual income statements. If the company loses money in the first few years, it may balance its other sources of revenue. Even so, understand the shareholder loss limitations set by the IRS.

Pass-Through Taxation: Starting an S-Corp is the widely known advantage in forming this kind of business structure since an s-corp uses a pass-through taxation structure. The company does not pay twice the tax in this kind of taxation. Because of this structure, most start-ups and entrepreneurs in New York apply for an S-Corp LLC.

Qualified Business Income Deduction: A qualified business income, or QBI, is the total of all qualified items of income, gain, deduction, and loss from any qualified trade or business, including S-Corp. With this, S corp owners may deduct up to 20% of their eligible earnings under the Tax Cuts and Jobs Act.

FAQs

What is an S-Corp?

An S-Corp is a type of corporation that has elected to be taxed under Subchapter S of the Internal Revenue Code.

What are the benefits of forming an S-Corp in New York?

An S-Corp in New York offers numerous benefits, including asset protection, limited liability, and the ability to pass corporate losses and profits directly to the owners. It also allows for an easier transition when expanding the business.

What are the steps to form an S-Corp in New York?

The first step is to choose a business name and obtain a business license from the New York Department of State. Next, you must file Articles of Incorporation with the New York Department of State. Then, obtain an Employer Identification Number (EIN) from the Internal Revenue Service (IRS). Finally, you must file Form 2553 with the IRS to make an election to be taxed as an S-Corp.

How much does it cost to form an S-Corp in New York?

The cost of forming an S-Corp in New York varies depending on the services you choose, but typically costs around $200 in filing fees.

What are the filing requirements for an S-Corp in New York?

S-Corps in New York must file an annual report with the New York Department of State, as well as an annual tax return with the IRS.

What is the tax rate for an S-Corp in New York?

The tax rate for an S-Corp in New York is generally the same as the personal income tax rate, which is 4.25%.

What are the requirements for maintaining an S-Corp in New York?

To maintain an S-Corp in New York, you must hold an annual meeting of shareholders, maintain proper records, file all necessary documents and tax returns, and comply with all applicable laws and regulations.

What are the rules for issuing shares in an S-Corp in New York?

The rules for issuing shares in an S-Corp in New York depend on the type of corporation and the number of shareholders. Generally, a corporation must have at least one shareholder, and no more than 75 shareholders.

What is the deadline for filing taxes for an S-Corp in New York?

The deadline for filing taxes for an S-Corp in New York is March 15th of the following year.

What is the New York State Sales Tax?

The New York State Sales Tax is 4%.

Is an S-Corp in New York required to pay the state minimum wage?

Yes, an S-Corp in New York is required to pay the state minimum wage, which is $11.80 per hour.

How do I start an S-Corp in New York?

To form an S-Corp in New York, you must first file a Certificate of Incorporation with the New York Department of State. This document establishes the corporation’s name, purpose, and location and provides other details such as the number of shares the corporation is authorized to issue. You must also obtain a Certificate of Authority from the New York Department of Taxation and Finance. Additionally, you’ll need to obtain an Employer Identification Number (EIN) from the IRS and obtain any necessary licenses or permits from the state or local government.

What are the benefits of starting an S-Corp in New York?

An S-Corp in New York offers several advantages, including limited personal liability, potential tax savings, and increased credibility. Additionally, New York is known for its robust business environment, which can provide additional resources and opportunities for entrepreneurs.

What is the cost to start an S-Corp in New York?

The cost to form an S-Corp in New York will vary depending on the services you use, such as an attorney or a filing service. Generally, the cost for filing the Certificate of Incorporation will range from $50 to $200, and the cost for obtaining the Certificate of Authority from the New York Department of Taxation and Finance will range from $25 to $50.

What taxes does an S-Corp in New York have to pay?

An S-Corp in New York will generally have to pay the state corporate income tax, which is 6.5% of the corporation’s net income. Additionally, the corporation may also be subject to other taxes, such as the New York City Unincorporated Business Tax, the New York Metropolitan Commuter Transportation Mobility Tax, and the New York City General Corporation Tax.

What documents do I need to start an S-Corp in New York?

In order to form an S-Corp in New York, you will need to file a Certificate of Incorporation with the New York Department of State, obtain a Certificate of Authority from the New York Department of Taxation and Finance, and obtain an Employer Identification Number (EIN) from the IRS. Additionally, you may need to obtain any necessary licenses or permits from the state or local government.

How long does it take to start an S-Corp in New York?

Generally, it will take one to two weeks to form an S-Corp in New York, depending on the services you use and any additional licenses or permits you may need to obtain.

Who can form an S-Corp in New York?

Any individual or business entity can form an S-Corp in New York, provided they meet the requirements of the Internal Revenue Service and the New York Department of State.

What are the requirements to form an S-Corp in New York?

To form an S-Corp in New York, you must first file a Certificate of Incorporation with the New York Department of State and obtain a Certificate of Authority from the New York Department of Taxation and Finance. Additionally, you must obtain an Employer Identification Number (EIN) from the IRS and obtain any necessary licenses or permits from the state or local government.

Are there any restrictions on forming an S-Corp in New York?

Yes, there are certain restrictions on forming an S-Corp in New York. For example, the corporation must have no more than 100 shareholders, no more than one class of stock, and must not be an insurance company or a public utility. Additionally, the corporation must be organized under New York law and must have a physical presence in the state.

Does an S-Corp in New York need to appoint directors?

Yes, an S-Corp in New York must appoint at least three directors. The directors are responsible for managing the affairs of the corporation and must be 18 years of age or older.

Does an S-Corp in New York need to hold annual meetings?

Yes, an S-Corp in New York must hold an annual meeting for its shareholders in order to elect directors and approve corporate actions. The meeting must be held within 13 months of the previous annual meeting.

Does an S-Corp in New York need to prepare annual reports?

Yes, an S-Corp in New York must prepare annual reports. The annual report must be filed with the New York Department of State within 120 days of the end of the corporation’s fiscal year.

Does an S-Corp in New York need to pay estimated taxes?

Yes, an S-Corp in New York must pay estimated taxes on its net income. Generally, estimated taxes must be paid quarterly to the New York Department of Taxation and Finance.

Does an S-Corp in New York need to issue stock?

Yes, an S-Corp in New York must issue stock in order to meet the requirements of the Internal Revenue Service. Generally, the corporation must issue at least one share of stock to each shareholder.

Does an S-Corp in New York need to appoint a registered agent?

Yes, an S-Corp in New York must appoint a registered agent. The registered agent must be an individual or business entity with a physical address in New York and must have the authority to accept legal documents on behalf of the corporation.

Does an S-Corp in New York need to file tax returns?

Yes, an S-Corp in New York must file tax returns with both the Internal Revenue Service and the New York Department of Taxation and Finance.

Does an S-Corp in New York need to pay payroll taxes?

Yes, an S-Corp in New York must pay payroll taxes on the wages it pays to its employees. Generally, the corporation must pay federal, state, and local payroll taxes.

Does an S-Corp in New York need to obtain workers’ compensation insurance?

Yes, an S-Corp in New York must obtain workers’ compensation insurance in order to protect its employees in case of injury or illness.

Does an S-Corp in New York need to obtain liability insurance?

Yes, an S-Corp in New York must obtain liability insurance in order to protect the corporation from potential legal claims.

Does an S-Corp in New York need to file a Statement of Information?

Yes, an S-Corp in New York must file a Statement of Information with the New York Department of State every two years. The Statement of Information must include the name and address of the corporation’s officers and directors, as well as the name and address of the corporation’s registered agent.

Does an S-Corp in New York need to observe corporate formalities?

Yes, an S-Corp in New York must observe corporate formalities in order to maintain its status as a separate legal entity. Generally, this includes keeping minutes of shareholder and board meetings, keeping corporate records, and issuing stock certificates.

Is there any additional information I need to know about forming an S-Corp in New York?

Yes, it is important to consult with an attorney to ensure that you are in compliance with all applicable laws and regulations. Additionally, you should consult with a tax professional to ensure that you are taking advantage of all available tax benefits.

Why New York S Corporation is So Important

One of the most prominent reasons why the S Corporation structure is highly coveted by many businesses is its tax benefits. As a pass-through entity, S Corporations do not pay federal income taxes at the corporate level. Instead, the profits of the company are distributed amongst the shareholders, who then report the income on their individual tax returns. This avoids the double taxation that can occur with C Corporations, where both the corporation and the shareholders are taxed on profits.

In a state like New York, where taxes can be notoriously high for businesses, the tax advantages of an S Corporation can provide significant relief. By avoiding the corporate tax level and only paying taxes on individual income, business owners can potentially save a considerable amount of money that can be reinvested into the company, employees, or growth opportunities.

Moreover, opting for an S Corporation structure can also provide important legal protections to shareholders. In the event of a lawsuit or financial difficulty, the personal assets of shareholders in an S Corporation are typically shielded from business liabilities. This limited liability protection is crucial for business owners who wish to protect their personal wealth and assets from potential risks associated with running a company.

Another critical aspect of operating as an S Corporation in New York is the flexibility it offers in terms of share ownership. Unlike C Corporations, which have strict ownership restrictions and can be more challenging to transfer shares, S Corporations can have up to 100 shareholders and allow for a more straightforward transfer of ownership. This provides businesses with the ability to bring on new partners, investors or allow for the easy transfer of ownership in the event of retirement or sale of the company.

Additionally, S Corporations in New York are not subject to the same self-employment taxes that come with operating as a sole proprietorship or partnership. This means that business owners can potentially save on taxes while still enjoying the benefits of limited liability protection and the flexibility offered by the S Corporation structure.

In conclusion, the decision to operate as an S Corporation in New York can hold substantial advantages for business owners looking to maximize tax benefits, protect personal assets, and enjoy flexibility in ownership and management. With the unique benefits provided by this business structure, it’s no wonder that so many organizations choose this route as they navigate the competitive landscape of the New York business world.

Conclusion

In conclusion, starting an S-corp in New York is a strategic choice for entrepreneurs seeking the benefits of limited liability and favorable tax treatment. One can successfully establish an S-corp by following the outlined steps, including selecting a unique name, filing the Certificate of Incorporation, obtaining necessary licenses, and adhering to state-specific regulations. Ultimately, this corporate structure offers a strong foundation for business growth and protection, making it a worthwhile consideration for those looking to launch a venture in New York.