How to start a business in New York

Preparing to start a business in any state can be overwhelming. But opening a small business in  New York State can be particularly rewarding, as the state offers many opportunities for small business owners from Buffalo to New York City and beyond. So if you’re ready to start a business in the state of New York, here’s what you need to know to succeed.

What do you need to start a New York business?

Starting a New York business requires working with the state and the local government. After you have a business name and plan, you’ll need to understand the regulations governing your business in the state. To do this, you can log in to New York’s Business Express Business Wizard to find the requirements for your business and ensure you apply for the proper licensing and permits. Different business structures will have additional requirements. You’ll also need to apply for tax and employer identification documents. Then, you’ll register as a New York State Sales Tax Vendor (if applicable). Finally, you’ll make sure you have the correct licenses and permits.

Let’s look at each of the following steps:

Step 1: Choosing a business name

Choosing the right name for your business will require some research. You should ensure your name stands out from the competition while giving your customers a good idea of your business's products or services. Choosing a name similar to competitors can confuse potential customers, and you may inadvertently give away business. So be sure to thoroughly research names before committing to your business name.

Once you have a name in mind, you’ll need to reserve it by filling out some paperwork. The necessary form can vary depending on your business structure. You must visit the Name Reservation page to ensure the name is available.

Step 2: Establishing a business plan

A business plan is critical to establishing a business, as it outlines many of the most important questions about your business. You'll need a sound business plan if you want financing from outside sources like a Small Business Administration (SBA) or bank loan.

Most business plans include the following sections:

Step 3: Choosing a business structure

After you complete the business plan, you’ll need to select your business structure. The legal structure you pick can affect how you run the business, including how the company is taxed, personal liability responsibilities, and funding availability.

Here are the types of companies you may form in New York State.

Sole proprietorship

In a sole proprietorship, an individual person runs and owns a business. Often, a sole proprietorship is just named after the individual. However, to form a sole proprietorship with a different name, you’ll need to file an Assumed Name Certificate with the clerk of the county in which you conduct business. For example, if your name is John Smith, but you want your sole proprietorship to be “John’s Jams,” you’ll have to declare that you’re doing business as (DBA) name is “John’s Jams.” You do not need to file any other formation documents for a sole proprietorship. The government taxes sole proprietorship business income through the proprietor’s personal tax return.

Limited Partnership (LP)

In a limited partnership, two or more people form a business together. In this structure, personal liability is joint and individual for the general partners, while limited partners are only liable to the extent of their capital contributions. To form a limited partnership, a Certificate of Limited Partnership and a Certificate of Publication must be filed with the New York Department of State. Business income from a limited partnership is taxed through each partner’s personal tax return.

General Partnership (GP)

A general partnership involves two or more people engaging in a business for profit. Personal liability is joint and individual for the general partners responsible for the partnership's obligations. Registering at the state level for a general partnership is not required, although the partners must file a Certificate of Assumed Name with the clerk of the county in which they conduct business. Business income from a general partnership is taxed through each partner’s personal tax return.

Limited Liability Company (LLC)

An LLC offers some of the same advantages to a corporate structure while fulfilling different tax obligations. To form an LLC in the Empire State, you must file Articles of Organization with the Department of State. While you don’t need to file an operating agreement by law, having one in place is a good idea.

With your LLC, personal liability for members is limited, and taxation can come in a few forms. A two-or-more-member LLC can elect association or partnership taxation structures. In contrast, a one-member LLC can elect an association structure or choose to be a legal entity separate from its owners.

Corporation

This business type allows a business to be a separate entity from its owners. While you can limit personal liability this way, electing a corporation could also mean increased taxes for the corporation or shareholders. To register a corporation in New York State, you must file a Certificate of Incorporation with the Department of State. For tax purposes, a corporation must pay state franchise taxes and taxes on income, while shareholders pay taxes on income that gets distributed as dividends. For more information specific to corporations in the state of New York, it’s best to consult a knowledgeable lawyer within the state.

For those who elect to form an LLC, a limited partnership, or a corporation, you’ll also need to declare a registered agent – an individual or company that will receive legal and tax documents for your business.

Step 4: Funding your business

Finding funding for your business is a critical step in forming your business. Here are the ways you can fund your new venture.

No money

Some businesses require very minimal startup capital. If you’re forming such a business, you may only need money for the filing fees to register your business.

Self-funding

Funding a new venture by yourself comes with advantages and disadvantages. If you choose to self-fund your business, you won’t be financially indebted to anyone else. However, failed ventures can cost a lot of personal capital. Evaluate your needs and this option with care.

Loans

Many banks and credit unions in New York State offer small business loans. Lenders will want to see a sound business plan when offering your business a loan. Therefore, you should ensure your business plan shows the necessary amount of detail to convey your vision to potential lenders.

Grants

Grants are another great way for entrepreneurs to start a business. Government entities or private organizations fund a variety of grants. Unlike a loan, you won’t have to pay back these grant amounts. 

In New York, there are many resources for funding, including a directory of alternative lenders. Check out the New York Small Business Hub to see all the financial resources, incentives and tax credits available to small businesses in New York.

Step 5: Filing for tax and employer identification numbers

All companies have specific tax liabilities, which vary based on your business structure. You’ll need to pay federal, state and local taxes. 

First, you’ll need to apply for an employer identification number (EIN) from the Internal Revenue Service (IRS). This number identifies your business entity, which you’ll use to pay federal taxes – like income taxes and payroll taxes. You’ll also need an EIN to open a business bank account, apply for licensing and permits, and hire and pay employees. The exception to this rule is sole proprietorships, which can use the owner’s social security number instead of an EIN.

In addition to this number, you’ll also need to register your business with New York’s Department of Taxation and Finance. Because each company will have its own registration requirements, you’ll want to utilize the NYS Business Wizard to get a checklist of the tax types you’ll need to apply for. If you sell products or services that require you to collect sales taxes, you’ll need to get a Certificate of Authority. Some cities (like NYC) also have local taxes you’ll need to register for.

As always, talking to a local tax professional for more specific information about your business is best.

Step 6: Getting a business bank account (and credit card)

Once you have your EIN and New York State identifications, you should open a business bank account. Doing this keeps your personal assets and business finances separate.

Almost every business will need a business account to pay bills, run payroll and make bookkeeping easier. Opening a business bank account is just like opening a personal bank account. Simply visit a local bank branch or open one online.

In addition to a business bank account, you’ll also want to open a business credit card. This can give you access to a line of credit to get your business off the ground while also helping to keep your personal finances and business accounts separate.

Step 7: Obtaining licenses, permits, and business insurance

When you fill out the Business Express new business questionnaire, it’ll give you information about the necessary business licenses and permits your business may need. There is no general business license in the state, but many professions have their own licensing requirements. In addition, you’ll get links to your local county clerk and county office, so you can ensure you have the necessary paperwork for local licenses, permits and zoning.

The state also requires many businesses to have forms of business insurance. If you plan to have employees at your company, you’ll need business insurance, unemployment insurance, workers' compensation insurance, and disability insurance. If you don’t have any employees, you’ll fill out a Certificate of Attestation of Exemption, which states your business isn’t required to have these types of insurance. When in doubt, check with a local agent to ensure you have the necessary coverage.

Frequently Asked Questions (FAQs)

Ready to work with a company that knows what it’s like to start a business?

Starting a business in New York is thrilling, but there is quite a bit to know before you begin. No sweat — a lengthy to-do list ever stopped a go-getter like you!

To help set you up for success, we recommend keeping this article handy and checking out Start-Up Path for Entrepreneurs, a tool designed to get you from idea to opening day with confidence.

Completely free and jam-packed with interactive worksheets and planning guides, the Start-Up Path for Entrepreneurs is a nice complement for the information in this article. You can move through it on your own schedule and reference it whenever you need to.

If on-the-go know-how suits you better, tune in to our Entrepreneur’s Studio podcast. You’ll hear empowering, inspiring stories from New York-based entrepreneurs like Danny Meyer and Christina Tosi as well as fashion designer Rebecca Minkoff and teacher-turned-entrepreneur Charles Best.

Ready to start a small business in New York? Let’s do this. Heartland is here to assist you.

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Heartland is the point of sale, payments and payroll solution of choice for entrepreneurs that need human-centered technology to sell more, keep customers coming back and spend less time in the back office. Nearly 1,000,000 businesses trust us to guide them through market changes and technology challenges, so they can stay competitive and focus on building remarkable businesses instead of managing the daily grind. Learn more at heartland.us