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At $1.7 trillion, New York’s economy is the country’s third-largest, and the state is a hub for a variety of industries. And because small businesses make up the majority of businesses, it’s a great place to launch a new venture. Still, starting a business in New York requires some planning (and some paperwork).
The first steps include choosing a business idea and name for your business, and then creating the business itself. Next, choose a business structure, incorporate it in the state of New York, prepare to pay taxes, obtain any necessary licenses and permits, and get insured. Finally, turn your attention to finding funding and marketing your business. This step-by-step guide to starting a business in New York will help you check off all the boxes.
1. Choose a business idea
Whether toying with the idea of turning your ceramics hobby into a side hustle or having ambitions of entrepreneurship and wanting to start a full-time business, having uncertainty about your venture making money may hold you back. You might be wondering: What makes a great business idea? You can put yours to the test by considering the following questions:
- What kind of leader and founder are you?
- Who are you selling to and can you reach that customer?
- What’s the potential profitability of your business idea?
If your answers to these questions inspire confidence, you’re ready to take the next step.
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. The latter is critical—not just to prevent potential customers from confusing you with a competitor—but because in New York, you can’t legally register your business with a name that’s already taken. Additional considerations during the naming process include:
- Is the name trademarked? When picking a name for your business in New York, search your desired name in the Department of State Corporation and Business Entity Database. If it’s available, make sure no one has trademarked the name at the federal level by doing a search on the U.S. Patent and Trademark Office’s site.
- Is the domain name available? Next, it’s time to consider your web presence. You’ll want to find an available domain name that matches or represents your business name. Purchase it as soon as possible to secure the domain name—before someone else snatches it up.
- Does it include the correct business identifiers? After checking the state and federal databases, you can reserve the desired name for 60 days by filing a Certificate of Reservation with the New York Department of State. Keep in mind: the 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 mailed with a $20 filing fee.
When to consider a DBA
If your business is a sole proprietorship or general partnership, you are required to file a DBA (doing business as) if you want to use a name other than your own. Owners of limited liability companies (LLCs), are not required to also file a DBA. However, in some cases, you may still choose to create a DBA, so that you can operate your company under a different name than your LLC. This can be useful if your LLC is under a generic name and you later decide to use something more appealing to customers.
3. Create a business plan
While careful forethought is not required to start your business, big-picture business planning can help set you up for success. Simply put, a business plan 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 and help hire employees, but creating one can also help business owners clarify their goals and strategies. If the pressure to write a business plan feels daunting, consider reviewing a few examples or using a template to get you started.
4. Choose a business structure
Once you’ve got a business idea, an available name, and an actionable business plan, it’s time to dive into the legal world of incorporating your company. First, you’ll need to choose a business type.
Choose the legal structure that is the best fit for your new venture, since your business type will affect factors including taxes and liabilities. The most common types of businesses are sole proprietorships, partnerships, corporations, and LLCs.
Sole proprietorships are unincorporated businesses that offer no legal distinction between the company and the person who runs it. It’s the most straightforward business model to start and manage but comes with the most personal risk. Because your sole proprietorship’s income is considered personal income, you file it under your personal tax return. You will also be personally responsible for any debts or obligations your business takes on, and won’t be able to take on investors with this business structure.
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 a sole proprietorship. The primary difference is two or more owners share income and responsibilities in a partnership.
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 just like a person would be. The corporate tax rate in New York is 6.5% for businesses that make less than $5 million per year and 7.25% for businesses that make more than that. Then, shareholders are also taxed for any dividends they receive from the business. While this double taxation (not to mention the extra paperwork and regulations) makes C corps an undesirable legal structure for many small businesses, they can be a great choice for larger, mature businesses that would benefit from having more 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 and the liability protection of corporations. By default, LLCs are categorized as pass-through entities. This means that the business’s income will pass through the LLC and onto its members, so you will avoid double taxation and include this money on your personal tax return. 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 take on.
Getting an employer identification number (EIN)
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 pretty straightforward: Fill out the form on the IRS website. 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.
Incorporating in New York
If deciding to create a corporation or LLC for your business in New York, you will have to incorporate. To do so, you must 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, purpose, 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.
5. 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.
6. 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. This required insurance covers your employee’s compensation in the case they sustain a workplace injury.
- Unemployment insurance. If you ever need to lay off employees, unemployment insurance will offer them temporary income.
- General liability insurance. This coverage is important to protect 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 that requires employers to provide disability benefits to employees for an illness or off-the-job injury (the others being Hawaii, Rhode Island, New Jersey, and California). 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.
7. Understand financial considerations
You’ve probably heard the saying, “You have to spend money to make money.” When it comes to starting a business in New York, that certainly may be true. Funding can include dipping into personal savings or bootstrapping to raise money from friends and family (consider signing a written agreement), crowdfunding, angel investors, and small business loans.
While traditional small business loans through banks can be hard to come by, there are programs that offer payroll, inventory, and marketing funding—all options with minimal paperwork and payment flexibility.
Preparing to pay taxes is another financial matter to consider.
The next step is registering your business with the New York State Tax Department. The requirements for your business will vary depending on local laws and what kind of products and services you sell. 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.
8. Market your business
Now that you’re up and running, it’s time to market your new business. To reach customers across platforms, 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. A few tips to get you started marketing your small business include:
- Describe your products and services in your own terms
- Assess the competition
- Determine your unique sales proposition
- Set your marketing budget
- Plan and begin your campaigns
- Track results and make adjustments
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 insurance.
Do I need a business license to start a business in New York?
There is no general business license required 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?
A Certificate of Incorporation (required to form a corporation) costs $125, and filing Articles of Organization (required to form an LLC) cost $200.
What are the advantages of starting a business in New York?
New York has the county’s third-largest economy, and more than half of its workforce is made up of small-business employees. New York City is a major hub for several 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.