Setting Up a Company in New York

When setting up a company in New York, the first step is to decide on the basic structure of the business. In practice, this means choosing the legal form, the business name, the owners and the people who will manage the company, and deciding how it will present itself to business partners and government authorities. The forms most commonly considered are the LLC and the C-Corp, although an LLP, LP or another structure may better suit certain types of business. New York is especially well suited to entrepreneurs who want to reach the vast US market, gain credibility with business partners, or tap into its financial, technology, real estate, consulting and international trade sectors.

The choice of state of formation is another key decision. A company can be formed in New York or in another US state, such as Delaware, Florida, Wyoming or Nevada. New York is usually the practical choice where the business is actually carried on there, for instance where the company has an office, staff, clients or business connections in New York. A company formed in another state that does genuine business in New York may need to register there as a foreign company authorised to operate in the state.

The tax position of a New York company extends beyond the state in which it was formed. The USA distinguishes between federal taxes, state taxes and, depending on the circumstances, city or local taxes. Federal income tax is a major factor for every US company. New York, however, stands out because its tax and administrative requirements can be more onerous than those of some other states. For corporations, the corporate franchise tax rules are the main consideration, while LLCs and partnership structures must also allow for ongoing fees, information returns and the taxation of their owners according to their tax status.

Prestige and reputation also merit consideration. New York is one of the best-known business centres in the world, and a company based there can make a highly credible impression, particularly in financial services, consulting, investment, trade, technology, marketing, media and real estate. At the same time, New York imposes more formal requirements than some simpler jurisdictions.

Disclosure and administration are another practical consideration. For a New York LLC, two obligations are particularly important: adopting an operating agreement and meeting the publication requirement, i.e. publishing a notice of the company’s formation in designated newspapers. This requirement is characteristic of New York and distinguishes it from many other states. It is therefore sensible to plan ahead not only for filing the formation documents but also for the steps that follow once the company exists.

If you opt for New York, you also need to budget for annual and other recurring costs. The company may need a registered address, mail handling, tax registration, internal documents and regular filings. New York does not operate a typical LLC franchise tax in the way some other states do, but companies must keep track of the biennial statement, their tax obligations, the publication requirement and any licences their line of business requires.

When forming a company in New York, or when arranging its tax affairs later, several tax regimes may be available depending on the type of company:

• the company can be tax-transparent, so that its profit or loss passes through to the owners under the pass-through taxation principle,
• the company can be taxed as a separate entity, in which case a second layer of tax may arise when profits are distributed to the owners, particularly as dividends,
• unless the owners elect a different regime, an LLC is treated by default as a transparent entity, whereas a Corp is generally taxed at company level.

• Setting Up a Company in New York
• Forming an LLC in New York
• Taxes in New York
• Sales Tax in New York
• Filing a Tax Return in New York
• New York Apostille
• Apostille on a New York Business Registry Extract

What our New York company formation service includes:

– Fees. The official state fee for forming a company in New York; – EIN / ITIN. Obtaining a US tax identification number for the company and assistance in dealing with the US tax authorities; – Legal documents: a certificate confirming the company’s formation or existence; the owners’ initial resolutions; the managers’ initial resolutions; a register of members or shareholders; a list of managers or directors; share certificates for a corporation; an operating agreement, bylaws or other internal documents depending on the chosen legal form; – Corporate Kit. A professional binder for keeping the company’s key documents; – Registered office. A registered address, receipt of official mail and, where agreed, scanning or forwarding of correspondence from state registries, courts and tax authorities; – Apostille, which may be required to use US company documents abroad, open a bank account outside the USA or transfer ownership interests.

Tax rates

Federal taxes

Types of federal tax: Federal taxes for companies (income tax) – these apply mainly to companies taxed as a C-Corp. Federal taxes for individuals (income tax) – these concern LLC owners, individuals and other pass-through structures.

Ltd., Inc. and Corp. entities are often treated as a C-Corp under US rules, unless the company elects a different regime. Such a company files a federal tax return and pays tax as an entity, and its shareholders may also be taxed on any dividends they receive.

S-Corp is a special US regime which, in practice, is open mostly to US citizens or permanent residents. Foreign owners who do not live in the USA will therefore usually choose between an LLC and a C-Corp.

An LLC (Limited Liability Company) can be tax-transparent under its default set-up. In that case, its profit or loss is not reported as the company’s own tax liability but is passed on to the owners. If a New York LLC has an office, employees, a warehouse, management or any other genuine business presence in the USA, the extent of its US tax obligations must be established. For foreign owners, a company with no active US operations needs to be distinguished from one that actually does business on US soil.

Social contributions may chiefly affect LLC owners who reside in the USA or are regarded as self-employed. In that case, self-employment tax, Social Security and Medicare must also be dealt with.

Individuals are taxed on their income according to their tax residence, the type of income and their connection with the USA. Foreign owners should therefore settle on their tax and legal structure before they begin trading.

State income taxes

Types of state income tax: State income taxes for companies – in New York, these mainly concern corporations and companies with a tax connection to the state. State income taxes for individuals – these may affect owners who have a tax link to New York or receive income from sources in the state.

In the USA, state taxes are not determined solely by where a company was formed. What often matters most is where the company has an office, employees, a warehouse, management, clients or some other economic presence. If a company is formed in New York and genuinely operates there, it will naturally have to meet New York’s tax and registration requirements. If it is formed elsewhere but is active in New York, it may have to register and pay tax in New York as a foreign entity.

From a tax perspective, New York is more complex than some other states. Corporations must assess their liability to corporate franchise tax under New York State rules. For LLCs and other pass-through structures, profit generally passes through to the owners, but that does not mean the company has no reporting, registration or fee obligations. Businesses operating in New York City may also be subject to separate city rules.

Sales tax – state turnover tax

Sales tax is a tax on sales that depends chiefly on where the customer is located and whether the company is obliged to collect the tax in that state. If a company sells to customers in New York and establishes a sales tax nexus there, it must register and remit the tax in accordance with New York’s rules. For online sales, the thresholds and rules of other US states must also be monitored, as the company’s home state may not be the only deciding factor.

Obligations in subsequent years