How to Incorporate in New York vs. How to Start a New York LLC

A Guide to Choosing the Best Business Entity in New York

Are you interested in starting a business in New York, but not sure if you should form an LLC or start a corporation? Active Filings has the guide for you! We’ll walk you through the advantages and disadvantages of incorporating or forming an LLC in New York. Throughout this New York-specific corporation and LLC formation guide, you’ll discover exactly how to form either an LLC or corporation in New York, and learn the disadvantages and advantages of each business type.

Then, after choosing which business formation best meets your needs, you can hire Active Filings to incorporate your business in New York for you. We’ll streamline the process and make it painless. Our starter package begins at only $25 (plus New York fees), and we’re sure that you’ll find out in no time why Active Filings is America’s most reliable business incorporation service.

Hire us to form your LLC or Corporation in New York!

New York LLCs vs. New York Corporations (Which is Better)

People looking to start a business often ask whether they should set up an LLC or incorporate for their new venture. Like everything else in life, the answer depends. Below you’ll find the three factors we think will help you make an informed decision.

  • Ease of maintenance
    LLCs are simply easier to maintain compared to corporations. Both offer solid liability protection from lawsuits, but a corporation has so many moving parts. Corporations have to hold shareholder meetings, elect directors, create bylaws, and keep notes from all the meetings. Tedius to say the least, but worth it if you are looking to grow your business big. For the rest of us, the LLC is perfect. You form it. You manage it, or higher someone to manage it for you. File your annual report. Boom. Easy.
  • Desired tax structure
    By default an LLC is a pass-through tax entity, meaning that the income is not taxed at the company level. The income or loss as shown on this return is ‘passed through’ the business entity to the individual members, and is reported on their individual tax returns. Less paperwork. More straightforward. A corporation is a separately taxable entity, and pays tax on the income prior to any dividend distributions to shareholders. If and when corporate earnings are distributed to shareholders in the form of dividends, the corporation does not receive the reasonable business expense deduction, and dividend income is taxed as regular income to the shareholders. Complicated. Paperwork. The Colorado LLC wins this one.
  • Investors
    When it comes to investing in a company, most investors feel most comfortable investing their hard earned money into corporations. The biggest reason investors prefer corporations is their favorable taxation rules. Unlike LLCs, a corporation’s shareholders are not taxed on company profits unless profits are distributed, which means the dividends paid from the corporation can be structured to take advantage of the best tax scenario for the shareholders. If you plan to grow your small business into a larger entity and attract investors, forming a corporation is your best bet.

Don’t sleep on the idea of prestige either. While “Uncle Joe’s Plumbing Service, LLC” is a fine upstanding company, it just doesn’t slap as hard as Nike, Inc. When you hear the word corporation, many people think of Amazon, Apple, and Walmart. While the LLC is perfect for the small to medium-sized business, it doesn’t carry the same cache as the corporation. While LLCs first came into being in the late 1970s, the corporation is the oldest recognized business entity in the US, and thus they carry with them an aura of prestige.

Advantages and Disadvantages of New York LLCs and Corporations

While we’ve already broken down the differences between an LLC and a corporation, we’re going to dig a bit deeper into the pros and cons of forming an New York LLC or corporation. Take a look below to see what makes New York LLCs and corporations unique:

  • Biennial Statement
    A majority of states require your business to file annual reports. Often time those reports cost $50 or more. Some even ring the bell at $300+. New York charges a $9 fee every two years. We’re no math geniuses, but that seems like a pretty good deal.
  • High Effective Individual Tax Rate
    The effective tax rate of an individual in New York, factoring in the average rate at which their earned income, such as wages, and unearned income, such as stock dividends, are taxed. In New York, according to Wallethub, that tax rate hits your pockets at 13.74%. Yowza that is steep.
  • Certificate of Publication
    When you form your New York LLC, the state requires that you to publish a notice of formation or the LLC’s Articles in two local newspapers. Once your notification is published (the state allows you up to 120 days to publish) in two papers, you’ll receive a formal Certificate of Publication. A quick online search shows that an LLC in New York City could be expected to spend over $500 just to publish it’s notification. When you form your LLC with Active Filings, you can escape the cash grab of the big city papers and publish using our address in Albany, where publication costs are much more affordable. Either way, New York’s Certificate of Publication is an added wrinkle in a process that already costs the business owner too much.

How to Incorporate in New York

New York requires corporations to file a Certificate of Incorporation with the Division of Corporations, State Records and Uniform Commercial Code (wow, that’s a mouthful). The Certificate of Incorporation costs $125 to file, and you can file the document online or by mail. Once filed with the state, this document formally creates your New York corporation. Hire Active Filings and we’ll fill out and file your Certificate for you. Our address and information will appear on the public documents, which will allow your info to remain private.

 

 

Your business name needs to include “Corporation,” “Incorporated,” “Limited” or an abbreviation for one of these words. Most keep things simple with “Inc.,” or “Corp.”

The form already includes a general corporate purpose. Most corporations skip this section. However, if your corporation is created for health or educational purposes, you’ll need to get the consent or approval from the appropriate state department and include a more specific purpose.

List the county in the state where your corporation is located.

The standard form authorizes 200 shares of stock at no par value. You can edit the number of shares if you’d like to authorize a different number, but you must authorize at least one. You can also include par value if you’d prefer—but be aware that in New York, shares with a stated par value can’t be issued or sold at a lower value.

The New York Secretary of State is automatically designated as an agent for your corporation. However, it is in your best interest to list an additional address where copies of legal notifications can be sent. If you hire Active Filings as your registered agent you’ll get same-day document scans.

You New York Incorporator is the person who signs your Certificate of Incorporation. You must have at least one incorporator, but it doesn’t have to be a director or officer. Active Filings will be your incorporator when you hire us as your registered agent!

How to Start an LLC in New York

The state filing fee for New York LLC Articles of Organization is $200. You’ll file it with New York’s Division of Corporations, State Records and Uniform Commercial Code. Section 206 of the New York State Limited Liability Company Law requires that within 120 days your LLC must publish in two newspapers a copy of the articles of organization or a notice related to the formation of the LLC. A Certificate of Publication, with the affidavits of publication of the newspapers attached, must be submitted to the New York Department of State, Division of Corporations. The fee for filing the Certificate of Publication is $50. So $250 all in and a bunch of hoops to jump through for your New York LLC.

Below we’ll fill you in on how to organize and file your Articles. If you want to save yourself the headache you can always hire Active Filings.

Your name must include “Limited Liability Company” or an abbreviation. Most businesses keep it simple with “LLC.” New York also has a long list of words and phrases you can’t use in your name. These are mostly words that suggest your business is something it isn’t (“corporation,” “state police,” etc.) or does something that requires licensing or approval you don’t have (“bank,” “finance,” “doctor,” etc.).

List the county where your LLC is located. This will determine which newspapers you’ll have to publish your notice of formation in. When you hire Active Filings as your registered agent, you’ll be able to use our Albany address, which means you won’t have to pay the publishing fees in NYC’s pricey newspapers. We’re already saving you money and streamlining your LLC!

The New York Secretary of State is automatically designated as an agent for your corporation. However, it is in your best interest to list an additional address where copies of legal notifications can be sent. If you hire Active Filings as your registered agent you’ll get same-day document scans.

If you file online, you’ll be asked if your LLC is managed by members or managers. Most LLCs are managed by members, but if you don’t plan to run the day-to-day operations, you can turn over decision-making power to one or more managers. You’ll make note of that here.

Not in a hurry to start your LLC? Push it off up to 90 days. Most LLCs choose to start immediately. Your choice.

Plan to put an expiration date on your LLC? Add that here. Want your business to continue indefinitely? Select “perpetual existence” on the online form. Most people choose perpetual.

If filing online, you also have to option to include a clause stating that the LLC will compensate members or managers for expenses (like attorney fees) incurred in connection to any sort of claim, lawsuit, or proceeding against the LLC.

Your organizer is the person who signs and submits your Articles of Organization. The organizer doesn’t have to be a member, manager, or anyone connected to the LLC. Hire Active Filings and we’ll be your organizer.

New York Biennial Statement Requirements

What is the New York Biennial Statement?
All businesses doing business in New York are required to file a Biennial Statement every two years with the New York Department of State. The Biennial Statement must include the name and business address of its chief executive officer, the street address of its principal executive office, and the address to which the state shall forward copies of process accepted on behalf of the corporation.

How much does it cost?
$9.

When is the statement due?
Your statement is due every other year of your anniversary month. For example, if you formed your business on May 15, 2019, New York wants to hear from you at the end of May 2021. When you hire Active Filings you’ll never miss a filing.

New York Business Taxes

No one likes taxes. America was built on not liking to pay taxes. Nevertheless properly paying your business taxes is an important part of running a small business. While we’re not tax professionals, Active Filings hopes to give you a simple and informative overview of the way your LLC or corporation may be taxed.

Corporations: The profit of a corporation is taxed to the corporation when earned, and then is taxed to the shareholders when distributed as dividends. This is what we mean when we say corporations face “double taxation.” If you are forming a corporation, you’ll want to pay attention to not only the state’s corporate tax, but also the state’s income tax rate, as you will be on the hook for both.

LLCs: For income tax purposes, an LLC with only one member is treated as an entity disregarded as separate from its owner, unless it files Form 8832 and elects to be treated as a corporation. However, for purposes of employment tax and certain excise taxes, an LLC with only one member is still considered a separate entity. One of the most significant benefits of an LLC is that of pass-through taxes. LLC owners don’t have to file a corporate tax return. An owner simply reports their share of profit and loss on their individual tax return. This prevents double taxation, your business paying taxes and you paying taxes.

What is the New York corporate net income tax rate?
7.1% . There is a minimum tax of $100-$1500 depending on your county and assets.

What are the New York personal net income tax rates?
0-8,000 4%
8,000-11,000 4.5%
11,000-13,000 5.25%
13,000-20,000 5.9%
20,000-200,000 6.85%
200,000-500,000 7.85%
500,000 + 8.97%

There are also a lot of local income taxes with an average rate of 1.17%.

What tax forms do I need to file with New York?
Corporations file Form CT-3
LLCs file Form IT-201 for residents and IT-203 for non-resident

When are my tax returns due?
New York corporation tax returns are due within 2 1/2 months following the end of your reporting period. For calendar year filers, this deadline is March 15th. If you cannot file by that date, you can apply for a New York tax extension.

Can I get an extension to file my taxes?
A New York business extension will give a corporation 6 additional months to file its return. To apply for a New York Corporate tax extension, use New York Form CT-5 (Request for Six-Month Extension to File). You must file Form CT-5 and pay your estimated New York tax balance by the original deadline of your return (March 15) in order for your extension to be approved. To make an extension payment, use New York Form CT-200-V.

Hire us to form your LLC or Corporation in New York!