New York provides several advantages for S Corps, including a lower tax rate and some tax exemptions. This guide will cover how to form an S Corp in New York.
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Every state has its own requirements for forming an S Corp. New York provides several advantages for S Corps, including a lower tax rate and some tax exemptions. This guide will cover how to form an S Corp in New York.
New York’s eligibility requirements specify the structure, ownership, paperwork, and filing criteria for starting an S Corp.
To form an S Corp in New York, your business must first be a domestic corporation, which means it must be incorporated within the state. It can’t be an ineligible corporation, such as an investment company, insurance company, or financial institution that uses the reserve method of accounting for bad debts.
An S Corp can’t have more than 100 shareholders. Shareholders must be U.S. citizens or residents, estates, certain trusts, or tax-exempt organizations. This limitation means that other corporations, partnerships, and non-resident aliens cannot hold shares in an S Corp.
S Corps can only have one class of stock, so all shareholders must have equal rights to profits, distributions, and liquidation proceeds.
Although voting and non-voting stock are permitted, the financial rights associated with each share must be identical.
You’ll need to fill out the following specific paperwork and documentation when you’re forming your S Corp:
You’ll have to pay a filing fee and make sure your S Corp pays New York State taxes.
You must file the Articles of Incorporation with the New York Department of State, Division of Corporations. The filing fee is $125.
S Corps in New York enjoy a unique tax structure due to their pass-through status, so the corporation itself is generally not subject to federal income tax. Instead, shareholders report their share of the corporation's income, deductions, and credits on their individual tax returns. However, New York State imposes a fixed-dollar minimum (FDM) tax on S Corps, which is determined by the company's New York receipts.
S Corps may also be subject to other taxes, such as payroll taxes and sales taxes, depending on the nature of the business. If your S Corp has employees, it is responsible for withholding state and federal income taxes, as well as Social Security and Medicare taxes, from their wages.
Although it’s a little complicated to set up an S Corp in NY, the following steps will help guide you.
Conduct a name availability search and reserve the name to ensure it remains available until you can file your Articles of Incorporation.
Before registering your S Corp in New York, you can check the Department of State's website to see if the name is available and not already in use by another business. It must include a corporate designator, such as "Incorporated," "Corporation," "Limited," or an abbreviation of one.
Reserving your name is optional but can be useful if you need additional time to prepare your incorporation documents. In New York, you can reserve a corporate name by filing an Application for Reservation of Name with the Department of State, Division of Corporations, along with the $20 reservation fee.
A registered agent serves as the primary contact between your corporation and the state, ensuring that your business remains informed and compliant with legal requirements.
A registered agent is designated to receive official legal and government documents on behalf of your S Corp. The primary responsibilities of a registered agent include receiving legal notices, important tax documents, and other government correspondence.
Your agent must have a physical street address within the state of New York and be available during regular business hours to receive documents. You can choose to act as your own registered agent if you meet these requirements, or you can appoint another individual, such as an attorney, accountant, or trusted associate.
The Articles of Incorporation serve as the foundation of your S Corp.
The Articles of Incorporation requirements include:
How to file: Submit the completed document along with the filing fee to the New York Department of State, Division of Corporations by mail or online through the department's e-filing system. Once your Articles of Incorporation have been filed and approved, your corporation will be officially registered and authorized to conduct business in New York.
To determine the specific permits and licenses required for your S Corp, consult the New York State Business Express website, which provides resources and guidance on licensing requirements.
General business permits and licenses may include a sales tax permit, employer identification number (EIN), or a local business license from your city or county. Research the specific requirements for your area and ensure that your corporation is compliant with all necessary local, state, and federal regulations.
You may also need industry-specific permits and licenses depending on the nature of your business. For example, businesses in the food service, healthcare, or construction industries may need to obtain special licenses and permits to operate legally.
Your board of directors will need to meet to make decisions about your new S Corp.
The first board of directors meeting, also known as the organizational meeting, is held to officially establish the corporation's initial management structure, adopt the bylaws, and address other essential matters necessary to set the foundation for your S Corp's operations.
During the first board of directors meeting, you should address several key items, including:
You’ll need to file annual paperwork to maintain your S Corp status in NY, including:
New York does not require S Corps to file an annual report. However, you'll need to file a biennial report every two years that includes:
New York State imposes a fixed-dollar minimum (FDM) tax on S Corps based on the company's NY receipts, which ranges from $25 to $200,000. Consult the most recent tax brackets and regulations from the New York State Department of Taxation and Finance to ensure accurate tax calculations and compliance.
If your S Corp has employees, you are responsible for withholding state and federal income taxes, as well as Social Security and Medicare taxes, from their wages. You may also be required to pay unemployment insurance taxes and carry workers' compensation insurance.
You may also have to comply with other regulations, depending on the nature of your business.
Depending on your business activities and location, your S Corp may need to obtain certain permits and licenses to operate legally, such as a sales tax permit or industry-specific permits and licenses required by local, state, or federal regulatory agencies.
Your S Corp may need to maintain various types of business insurance coverage, such as general liability insurance, property insurance, and workers' compensation insurance.
You should be aware of some specific considerations when forming an S Corp in NY.
New York State requires newly formed corporations, including S Corps, to publish a notice of their formation in two newspapers—one daily and one weekly—within 120 days of filing the Certificate of Incorporation. The newspapers must be designated by the county clerk in the county where the corporation's office is located. The notice must be published for six consecutive weeks, and upon completion, you will receive an Affidavit of Publication from each newspaper.
You must then submit a Certificate of Publication, along with the affidavits, to the New York Department of State and pay the required filing fee. Failure to meet the publication requirement can lead to penalties and suspension of the corporation's authority to do business in New York.
Certain professions in New York, such as attorneys, accountants, architects, and engineers, are required to form a professional corporation (PC) or professional service corporation (PSC) instead of a standard corporation. These entities have specific rules and regulations governing their operations, and they may also be eligible for S Corp status.
If you plan to operate your S Corp within New York City, be aware that the city has additional regulations, permits, and licensing requirements that you must comply with. For example, New York City imposes a separate General Corporation Tax (GCT) on corporations that conduct business within the city.
New York State offers various incentive programs to encourage business growth and development. These programs may provide tax credits, grants, loans, or other benefits to eligible businesses. Some of the programs include the Excelsior Jobs Program, the Start-Up NY program, and the Minority and Women-Owned Business Development and Lending Program. Research these and other state programs to determine if your S Corp may qualify for any incentives or assistance.
Forming an S Corp in New York can offer numerous benefits for entrepreneurs looking to grow their businesses, including tax advantages and limited liability protection. To get started, you'll need to choose a name, appoint a registered agent, submit the required paperwork, and draft bylaws. Once your S Corp is formed, you'll need to comply with ongoing requirements, such as holding shareholder and director meetings, maintaining accurate financial records, filing annual reports with the New York Department of State, and meeting tax obligations at the federal, state, and local levels.
As you remain compliant with ongoing requirements, you can set the stage for success in the state's thriving economic landscape. It's a good idea to leverage available resources and support, such as the SBDC, the New York State Business Express, and local chambers of commerce, to strengthen your foundation for a prosperous S Corp in New York.
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