When starting a business in New York, one of the most important decisions you’ll make is how to structure your company.
It’s not a decision to take lightly, as it will impact every facet of your business, from how much you earn to how much you’re taxed. It even impacts your financial liability. Before anything else, determine the structure that best suits your needs.
If you choose to incorporate, there are many benefits to the corporate business structure.
Typically, corporations offer more personal liability protection to the shareholders involved. You’ll also have an easier time raising capital, planning for retirement, and transferring ownership of the business.
In this guide, we’ll discuss everything you need to know about forming your New York corporation.
How do I form a corporation in New York?
Steps to form your New York Corporation
- Name Your Corporation
- Appoint Directors
- Choose an New York registered agent
- File the New York Articles of Incorporation
- Create Corporate Bylaws
- Draft a Shareholder Agreement
- Issue Shares of Stock
- Apply for Necessary Business Permits or Licenses
- File for an EIN and Review Tax Requirements
- Submit Your Corporation’s First Report
To start a corporation in New York, you must file a Certificate of Incorporation with the New York Department of State.
To simplify the process of forming a corporation in New York, we’ve put together 10 easy steps to form your business:
Step 1: Name Your Corporation
As you set up your New York corporation, your first step is to choose a business name that fits your product or service. Keep in mind that your name will establish the first impression that many customers will have of your business.
There are other things to consider, as well. Most importantly, before you incorporate, ensure your top name choice is available for use. You’re not allowed to choose the same name as an existing company in New York. Your name can’t even be too similar to that of another entity.
Luckily, it’s easy to check your chosen name against the state’s Corporation and Business Entity Database. When brainstorming names, it will help to have a few options in case one is taken.
Your company name must also include one of the following designators indicating the type of business it is: “Incorporated,” “Limited,” “Corporation,” or an abbreviation of one of these.
Incorporated means your company has been established as an entity separate from the individuals who have formed it. This limits their liability in the event of a lawsuit. Shareholders and others leading the company have limited liability when it comes to the business’s debts and legal issues.
New York also restricts or prohibits certain words and phrases from being used in corporate business names. You might be surprised by some of the restricted words: “Olympic,” “Chamber of Commerce,” “Academy,” “Redevelopment,” “Education,” “Handicapped,” and many others.
Check the state’s complete list of restricted words before finalizing your name.
Once you’ve settled on a name that works for your brand, check to make sure it isn’t trademarked, so you don’t infringe on someone’s registration.
Names can be trademarked on the federal or state level. To see if your desired name has been trademarked in New York, call the state records office of the New York Department of State at (518) 473-2492. To search federal trademarks, visit the United States Patent and Trademark Office (USPTO) website.
After you determine that your name is legally available, you may want to register your own trademark at the state and/or federal levels. Federal registration comes with broader protection, which is valuable if you plan to do business outside of New York. Visit the USPTO website for more information on federal registration.
To register a trademark in New York, you will need to fill out this form and submit it with a $50 filing fee. It is often quicker and easier to file at the state level. You can learn more about New York trademarks here.
Note that if you need some time before you file your Certificate of Incorporation with New York, you can reserve your chosen name for up to 60 days. The filing fee is $20, and you will need to mail the form to:
New York Department of State
Division of Corporations
One Commerce Plaza
99 Washington Avenue
Albany, NY 12231
Something else to consider when coming up with your New York corporation name is whether you want to use an assumed name, commonly referred to as a “doing business as” (DBA) name in other states. This is another name you can use to operate your corporation in New York. To use it, you will need to submit a Certificate of Assumed Name with a $25 fee, plus an additional fee for every county where your corporation conducts business. The fee for counties within New York City (Bronx, Kings, New York, Queens, and Richmond) is $100. Counties outside of that city are $25.
Finally, once you’ve chosen a name, you may want to create a website for your business. Before you register your business as a corporation, it’s a good idea to see if an available website domain name matches your business name. Once you’ve found one, you can partner with ZenBusiness to obtain the domain name on your behalf.
Step 2: Appoint Directors
Once you’ve established a name, your next step is to appoint a board of directors. Your board’s primary job is to provide oversight for your organization, particularly regarding financial matters.
In New York, corporations are required to have at least one director. These directors must be at least 18 years old, but they don’t need to be residents of the state.
It’s important to note that the company’s founders and shareholders may be directors. At the same time, directors are not required to be shareholders of the business.
You also need to establish bylaws to govern your board of directors, who will approve them at an organizational meeting. You should hold this meeting before incorporation, but New York law allows you to hold this meeting after filing.
At this same organizational meeting, those incorporating the business will present and sign a document that formally appoints the board of directors and transfers certain powers and actions. It’s also a good time to establish your company’s share structure.
Step 3: Choose an New York Statutory Agent
Every state requires a corporation to have a registered agent, sometimes referred to as an “agent for service of process.” This an individual or entity designated to receive legal documents and state correspondence — such as tax notices and subpoenas — for your business.
New York is unusual in that it requires you to list the New York Secretary of State as your registered agent. You will need to provide an address the Secretary of State can forward all correspondence and notices to.
However, state law also allows you to appoint a registered agent in addition to the Secretary of State (the Secretary of State office remains your primary agent). This agent can be a resident of New York, someone with a business address in New York, or a corporation authorized to do business in the state.
A registered agent service can help fulfill this role by ensuring you’re quickly notified when important notices arrive and by organizing and safekeeping important correspondence for you.
Step 4: File the New York Certificate of Incorporation
Once your company name, directors, and registered agent are in place, you’re ready to file your Certificate of Incorporation with New York’s Department of State. Filing this document establishes your business as a corporation.
Some states refer to the Certificate of Incorporation as the “Articles of Incorporation,” so don’t get confused if you see that phrase elsewhere. They are essentially the same thing, though.
When filing a Certificate of Incorporation in New York, you’ll need the following information and items:
- The name of your corporation
- Your business address, including the county where it’s located
- A statement of purpose
- A copy of your name reservation certificate, if you have one
- Information about your corporation’s authorized stock
- An address where the Secretary of State can mail any process they receive in their role as registered agent
- The duration of your corporation, if not perpetual
- Names and addresses of your incorporators
- A filing fee ($125 for for-profit companies, $75 for nonprofit organizations)
You’re not required to use the state’s designated form if filing by paper. You can create your own and add any optional provisions, as long as they’re legal. For example, the state’s form lists an authorized stock structure of 200 shares with no par value. If you’d rather have a different number of authorized shares with a certain par value, you can make your own certificate. The state has instructions for doing so here, along with additional information.
You can file your Certificate of Incorporation by mail, forwarding the form and payment for the filing fee to:
New York Department of State
Division of Corporations
One Commerce Plaza
99 Washington Avenue
Albany, New York, 12231
Other filing options include in-person or by fax, but the easiest method is using the Department of State’s online filing system.
Step 5: Create Corporate Bylaws
Creating corporate bylaws is an important step in launching your business. This legal document will define how your company governs itself.
Among the items your bylaws might include are:
- A statement of purpose
- Defined operational guidelines
- A list of duties and responsibilities of all shareholders
- A list of rights and powers of shareholders, officers, and directors
- The process for electing and removing officers and directors
- Annual meeting scheduling and goals
- Plans for stock distribution, sales, and transfers
Your company’s incorporators should adopt the bylaws at your organizational meeting. After this, they can be adopted, amended, or repealed by a majority shareholder vote.
While you aren’t legally required to file your bylaws with the New York Department of State, you are still expected to maintain them as internal documents.
Step 6: Draft a Shareholder Agreement
As you launch your corporation, another integral document is your shareholder agreement. This legal contract is designed to protect the rights of your stockholders — both majority and minority investors.
This document should clearly define who can be a shareholder in your company and provide safeguards for minority positions. Any restrictions on the transfer of shares should also be included.
Finally, your agreement should define the value of a single share of your company’s stock and details on payments in the event of a company sale.
Step 7: Issue Shares of Stock
As a corporation, you’re required to issue stock in your company.
When you filed your Certificate of Incorporation, you designated the number of shares that you hoped to issue. Legally, you can issue any number of shares up to the figure you filed.
As you launch your company, you also need to assign a value to your stock. You can determine this number by anticipating your corporation’s future performance and dividing it by the total shares of stock offered. After this, the value will fluctuate based on supply and demand.
Your corporation’s stock may be issued privately or publicly. A privately traded company is typically owned by its founders, managers, or a small group of investors. If your company is public, a portion of your corporation’s stock must be made available to the public.
If your corporation is public, you’re legally required to keep track of stock purchases and sales. These transactions must be reported to the U.S. Securities and Exchange Commission (SEC). You must also register with New York’s Investor Protection Bureau as a broker-dealer. However, this often doesn’t apply to small corporations making an unadvertised private sale of its initial shares, so check with the Investor Protection Bureau about your situation.
Step 8: Apply for Necessary Business Permits or Licenses
Even after you file your Certificate of Incorporation, you’ll need to acquire the required licenses and permits to operate.
Unfortunately, there’s no one-stop shop for these necessary items. Licenses vary by industry and location and could include federal, state, and local requirements. Luckily, the New York Business Express offers new business owners a helpful tool that creates a checklist of required New York forms, licenses, and permits tailored to their specific situations.
Check with the economic development offices at the county and city levels to learn about any permits or licenses that you’re required to obtain through these local municipalities.
Step 9: File for an EIN and Review Tax Requirements
After you incorporate your business, apply for a federal Employer Identification Number (EIN). Like a Social Security number for an individual, this nine-digit number is used for business identification and tax purposes.
You can apply for an EIN for your corporation by visiting the IRS website. The process can be completed in minutes and is free.
Once you’re assigned an EIN, you must register it with New York, especially if you have employees. This number is used to track your employees’ wages, unemployment claims, and tax withholdings.
Your EIN is also needed for your corporation to file its federal and state taxes each year.
Step 10: Submit Your Corporation’s First Report
All New York corporations must file a Biennial Statement with the Department of State every two years.
Your first report should be filed in the calendar month that you filed your Certificate of Incorporation.
The statement should include:
- The name and business address of the company’s chief executive officer
- The address of its main office
- The address where the Secretary of State forwards copies of official documents received on the corporation’s behalf
- The number of members on the board of directors
- The number of female directors
Corporations can file their Biennial Statement online through the Department of State’s e-Statement Filing System. There is a $9 filing fee for this transaction.
How much does it cost to start a corporation in New York?
The cost to form a corporation in New York starts with the filing fee of your Certificate of Incorporation, which is $125. This cost remains the same whether you file online, in person, by mail, or by fax. You’ll also have the $9 biennial statement fee.
There may also be additional costs, like the name reservation fee of $20 or fees associated with licenses or permits needed to operate.
ZenBusiness can help streamline the formation process with our starter package. We’ll worry about the red tape, so you can focus on growing your small business.
What are the benefits of a corporation in New York?
There are many benefits to forming a corporation in New York.
First, there’s less risk for owners, as the corporate structure creates an entity entirely separate from the individuals forming the business. This provides owners more personal protection financially and legally.
The issuance of stock also makes it easier for corporations to raise capital and obtain funding. It’s also easier for corporations to offer retirement plans and transfer ownership.
Specifically, there are many advantages to forming a corporation in New York, including tax incentives, financial support for small business owners, and professional development opportunities.
There are some disadvantages to incorporation, as well. C corporations can experience double taxation — first on their profits as a corporation, and again when their shareholders are taxed on their dividends.
How is a New York corporation taxed?
How your New York corporation is taxed depends on its specific structure.
C corporations are viewed as distinct taxable entities, which means they are responsible for paying corporate taxes. This means that the corporation itself is taxed on profits, and the shareholders then are taxed on their share of the profits. New York also requires them to pay an annual franchise tax. The amount is calculated based on whichever of the following is the highest tax: the company’s business income, its business capital, or a fixed dollar minimum (FDM) tax, which is determined by the corporation’s New York State receipts.
C corporations may also have to pay a metropolitan transportation business tax if they do business or have office space in what’s known as the Metropolitan Commuter Transportation District (MCTD). This district is made up of the counties of New York, Bronx, Kings, Queens, Richmond, Rockland, Nassau, Suffolk, Orange, Putnam, Dutchess, and Westchester.
An S corporation refers to a tax status a C corporation applies for with the IRS. Under this structure, you avoid double taxation because the corporation itself is not federally taxed on profits, only the shareholders when they receive their share of profits.
If your business is registered as a federal S corporation, it isn’t automatically recognized as one by New York. To elect S corporation status for New York tax purposes, your shareholders will need to select this designation by filing form CT-6. If you successfully apply, New York will still charge your S corporation a franchise tax, but it will be a fixed dollar minimum tax based on New York receipts. Also, the metropolitan transportation business tax doesn’t apply to S corporations.
Nonprofit corporations can apply to the IRS to be exempt from federal income tax. New York nonprofits can also submit an application to the state to be exempt from the state’s franchise tax. They may be able to apply for a sales tax exemption, also.
New York Corporation FAQs
- Does running a corporation in New York involve more paperwork than running other types of businesses?
Corporations are more complex structures than other types of businesses and typically require additional paperwork, such as special tax filings and reports on stock transactions.
- What is the difference between an LLC and a corporation in New York?
Like a corporation, a limited liability company (LLC) is a business in which the company’s owners have limited liability for its financial and legal obligations, but, unlike a corporation, there is no board of directors, and no shares are issued by LLCs.
- How do I change my corporation’s name in New York?
You can change the name of your corporation in New York by filing a Certificate of Change with the New York Division of Corporations, State Records, and Uniform Commercial Code and paying a $30 filing fee.
- How many people are needed to form a corporation in New York?
A single person can form a corporation in New York.
- Can I form my New York corporation online?
You can form your New York corporation online using the Business Express website.
- How do I dissolve my New York corporation?
To dissolve your corporation, you will need to file the Certificate of Dissolution and pay $60.