Taxes in New York

New York Taxes: Tax Obligations of an LLC and a Corporation

New York State is one of the most important economic hubs in the world. Forming a company in New York brings considerable prestige and direct access to global capital, but it also demands attention to a complex state and local tax system.

The tax treatment of a company in New York depends on its legal form, its tax classification, its physical and economic connection with the state (nexus) and where it does business (including the special taxes levied by New York City).

• Forming a Company in New York
• Forming an LLC in New York
• Taxes in New York
• Sales Tax in New York
• Tax Returns in New York
• New York Apostille

Key Features of New York State Taxation

New York is not one of the states with zero income tax. Companies doing business in the state are subject to state income taxes and, if they operate in New York City, to additional city taxes as well.

The main tax components in New York include:

• US federal income tax (21% for a C-Corp),
• New York State corporate income tax (6.5% – 7.25%),
• the annual LLC fee (a Filing Fee based on New York income),
• New York City local taxes (NYC Unincorporated Business Tax / Corporate Tax),
• state and local Sales Tax.

How Is a New York LLC Taxed?

As at federal level, an LLC in New York is tax-transparent by default. A single-member LLC is treated as a disregarded entity, while a multi-member LLC is treated as a partnership.

New York charges an annual fee (Annual Filing Fee / IT-204-LL) on LLCs that have income, gains or losses from New York sources. The amount depends on the gross income earned in New York State and ranges from USD 25 to USD 4,500 a year.

Taxation of a New York C Corporation

Corporations in New York are subject to state corporate income tax (Corporate Franchise Tax). The basic state rate ranges from 6.5% to 7.25%, depending on the level of taxable income. Where a Corporation does business directly in New York City, a city income tax (of approximately 8.85%) also applies.

Sales Tax in New York

New York’s state sales tax stands at 4%. Local and county surcharges are added to this rate, however, bringing the total Sales Tax in most localities (including NYC) to **8.875%**.

Form 5472 for Foreign Owners

Where a single-member New York LLC is owned by a foreign person (for example, a UK resident), it must file federal Form 5472 together with a pro forma Form 1120 with the US tax authority, the IRS, every year. Failure to comply carries a penalty of USD 25,000.

Conclusion

New York offers outstanding prestige and a strong business base, but it requires meticulous tax administration at both state and city level. Before entering the New York market, it is essential to review the state filing fees as well as your Sales Tax obligations.