Create a New York S Corp

Establishing an S corporation in New York involves navigating both federal and state-specific requirements, which can be time-consuming but offer potential tax benefits for your business. While the federal process mirrors that of many other states, the Empire State mandates extra steps for state tax compliance. This guide is designed to simplify these procedures, providing you with a clear pathway to forming an S corp in New York.

For limited liability companies (LLCs) in New York, electing S corp status could result in reduced self-employment taxes for its members. Similarly, for C corporations within the state, transitioning to an S corp structure offers a viable solution to bypass the issue of double taxation on the company’s profits.

Requirements for New York S Corporations

The IRS has a few S corporation filing requirements and limitations you should be aware of before you begin this process. Specifically, to qualify for S corporation election, an entity must:

• Be a domestic corporation or LLC 
• Have only one class of stock
• Have no more than 100 shareholders or members (“shareholders” is the term for owners of a corporation, while “members” is the term for owners of an LLC)
• Have only allowable shareholders or members, which includes individuals, certain trusts, and estates. The shareholders may not be partnerships, corporations, or non-resident aliens. A nonresident alien is an alien who has not passed the green card test or the substantial presence test.
• Not be an ineligible corporation, such as certain financial institutions, insurance companies, and domestic international sales corporations

If your business entity meets these requirements, you can apply for an S corporation election. 

New York State-Specific Considerations

In an S corp, the business itself doesn’t usually pay federal income taxes. But what about state income taxes?

The State of New York does not automatically treat your company as an S corporation for state tax purposes. To make the New York S corporation election, you’ll need to file Form CT-6, Election by a Federal S Corporation to be Treated as a New York S Corporation. But before you do that, you need to make sure that you meet the following requirements:

• Be a federal S corporation.
• Be a general business corporation taxable under Article 9-A or be the parent of a qualified subchapter S subsidiary (QSSS) that is taxable under Article 9-A of the New York State Tax Law. Insurance corporations taxable under Article 33 or any corporation taxable under Article 9 can’t elect to be a New York S corporation.
• Get consent from all of the corporation’s shareholders for making the New York S election. You’ll need to list all of them on Form CT-6 and include their signatures.

Even if they make the New York S corporation election, S corps are still responsible for paying the state’s corporation franchise tax. The business pays a fixed dollar minimum tax based on New York receipts.

New York City S Corp Considerations

If your business is in New York City, note that the city doesn’t recognize federal or New York S corp elections. New York City has a general corporation tax (GCT) that all domestic and foreign S corporations and qualified S subsidiaries must pay if they’re doing any of the following in the city:

• Doing business;
• Employing capital;
• Owning or leasing property, in a corporate or organized capacity; or
• Maintaining an office.

However, the following kinds of S corporations are exempt from the general corporation tax, including:

• Dormant S corporations that did not engage in any business activity or hold title to real property located in New York City
• S corporations subject to tax under the banking corporation tax
• S corporations subject to the utility tax, except vendors of utility services that are subject to the GCT
• S corporations organized to hold title to property as described in sections 501(c)(2) or (25) of the Internal Revenue Code
• Insurance corporations
• Non-stock, not-for-profit companies that are granted an exemption by the New York City Department of Finance
• Limited-profit housing and housing development fund companies organized and operating under Articles 2 and 11, respectively, of the Private Housing Finance Law

The good news for New York City S corporations is that they’re exempt from the city’s Business Corporate Tax.

How to Start an S-Corp in New York

Before you can apply to be an S corporation, you’ll need to create either an LLC or a corporation if you haven’t already done so. Then, you’ll file an election form with the IRS.

S-Corp Election Steps for LLCs

For detailed formation steps, see our New York LLC formation guide.

• Step 1 – Choose a name 
• Step 2 – Choose a registered agent
• Step 3 – File Articles of Organization
• Step 4 – Create an operating agreement
• Step 5 – Apply for an EIN
• Step 6 – Meet the New York LLC publication requirement
• Step 7 – Apply for S Corp status with IRS Form 2553

S-Corp Election Steps for Corporations

For detailed formation steps, see our New York Corporation formation guide.

• Step 1 – Name Your New York Corporation
• Step 2 – Appoint Directors and Registered Agent
• Step 3 – Choose a New York Registered Agent
• Step 4 – File the New York Certificate of Incorporation
• Step 5 – Create Corporate Bylaws and Shareholder Agreement
• Step 6 – Draft a Shareholder Agreement
• Step 7 – Issue Shares of Stock
• Step 8 – File for an EIN and Review Tax Requirements
• Step 9 – Apply for Necessary Business Permits or Licenses
• Step 10 – Submit Your Corporation’s First Report
• Step 11 – Apply for S Corp status with IRS Form 2553

File the form to apply for S corp election

Submit the form to apply for S corporation status. Once your LLC or corporation formation is approved by the state, you need to file Form 2553, Election by a Small Business Corporation, to get S corporation status. 

The IRS requires that you complete and file your Form 2553 with the IRS: 

• Within 75 days of the formation of your LLC or C corporation, or no more than 75 days after the beginning of the tax year in which the election is to take effect

OR

• At any time during the tax year preceding the tax year the election is to take effect.

One caveat for LLCs wishing to file as an S corporation: If your LLC is past the 75-day election deadline, you’ll also need to file Form 8832, Entity Classification Election, to elect to be taxed as a corporation. Then you would file both Form 8832 and Form 2553 together via USPS-certified mail. 

Note that all of the shareholders/members must sign the consent statement portion of the form. For more information on when and how to file Form 2553, visit the IRS website.

File CT-6 Form

New York doesn’t automatically honor your federal S corp status election; you have an additional form to file: Form CT-6. You’ll need to fill this form out and submit it to the Department of Taxation and Finance. Titled the “Election by a Federal S Corporation to be Treated As a New York S Corporation,” this form officially informs the state of your new tax treatment.

To complete this step, you need to fax Form CT-6 along with a copy of your federal S corp approval letter to the state at 518-435-8605. You can also mail it to:

NYS Tax Department

CT-6 Processing

W A Harriman Campus

Albany, NY 12227-0852

Additionally, make sure to keep a record of your fax confirmation as proof of filing, which might be required for future reference or in case of queries from the state tax department.

S Corp Tax Deadline in 2025

For S corporations in New York, the tax filing deadline for the year 2025 is March 15. This date is crucial as it is when S corporations must file their tax returns to report their income, deductions, and credits from the previous year. Adhering to this deadline is essential to avoid penalties for late filing and help ensure that all financial responsibilities are managed appropriately.

S corporations should prepare their documentation well ahead of the deadline, helping to ensure that all financial records are accurate and complete. This includes organizing receipts, reconciling bank statements, and preparing financial statements. Additionally, shareholders should be ready to receive their Schedule K-1 forms, which report their share of the corporation’s income and losses, in time to file their personal tax returns by April 15. Meeting these deadlines helps maintain the company’s compliance and streamlines the tax reporting process.

New York S Corp: Startup Cost and Fees

Starting any business, including an S corporation, comes with certain startup costs. The total fee for filing a Certificate of Incorporation to create a corporation in New York is $195. For those opting to form an LLC, the New York filing fee for the Articles of Organization is $205. These fees are crucial initial investments for establishing your business’s legal foundation in New York.

In addition to the initial filing fees, businesses looking to operate as an S corporation may also face other costs. These include NY fees for required publications, which businesses must fulfill by publishing their formation in two newspapers within the county of their principal business location, as mandated by state law. Costs can vary significantly based on the county and the newspapers chosen. 

Furthermore, all entities must maintain a registered agent in the state, which can have fees if you use a professional service. Proper planning for these expenses is essential for a smooth start and compliance with New York State regulations. 

Pros and Cons of Filing as an S Corp in New York

While S corporation classification does come with benefits for some businesses, making this election might not be right for every company. Carefully weigh the pros and cons before deciding how you want to move forward.

Advantages of S Corp Status for LLCs

The advantages of filing as an S corporation for an LLC differ from the advantages for C corporations. By default, a traditional LLC already has pass-through taxation, so the benefits of S corp election for an LLC have to do with self-employment taxes.

The members of a standard LLC are considered self-employed. They’re compensated by receiving their share of profits from the LLC, but they can’t be employed by the LLC. Being self-employed means paying self-employment taxes (Social Security and Medicare, which adds up to about 15.3%) on the profits received from the LLC. This is more than the taxes they’d pay for Social Security and Medicare when working for someone else because their employer would pay part of them.

But when the members elect S corp status, they can be compensated in two ways: by receiving their share of the profits and by being paid as an employee of the LLC. Then they only pay self-employment taxes on their salary and not the profits they receive. 

Depending on factors such as how profitable your company is, the savings could add up to a lot. Of course, the members must still pay state and federal taxes and all other applicable taxes on their share of the profits. Money paid out as salary is also a tax-deductible expense for the business. 

Reasonable Compensation

One caveat to this arrangement is that the IRS expects you to pay yourself a “reasonable” salary as an employee of the LLC. Otherwise, you could pay yourself an annual salary of $5 and avoid contributing anything to your Social Security and Medicare. 

But what is “reasonable compensation” to the IRS? While the terms aren’t completely defined, the IRS seems to consider “reasonable” to be something similar to what others in your field are earning for the same work. If the IRS determines that your salary isn’t reasonable, it has the authority to reclassify your non-wage distributions (which are not subject to employment taxes) to wages (which are subject to employment taxes). Several court cases have supported their right to do this.

Advantages of S Corp Status for C Corporations

If you have a C corporation (the default form of corporation), filing as an S corp does have its advantages:

• Pass-Through Taxation: Traditional corporations endure double taxation, where the business profits are taxed twice — once at the corporate level and again when the shareholders get their profits. S corps avoid that.
• Writing Off Losses: S corporation owners are allowed to report business losses on their personal tax returns. C corporations cannot. 
• QBI Deduction: S corporations are allowed to claim the Qualified Business Income tax deduction, where owners can deduct up to 20% of their share of the business income. C corporation shareholders can’t take this deduction.

One quick note: since the 2017 Tax Cuts and Jobs Act, the corporate tax rate has lowered to a flat 21%. This reduces the disadvantage of double taxation somewhat. 

Disadvantages of S Corp Status for LLCs

Having an LLC with S corp status can also have drawbacks over a traditional LLC:

• Stricter Requirements: S corporations can’t have more than 100 members, and their members can’t be partnerships, corporations, or non-resident aliens. Regular LLCs don’t have those requirements.
• More IRS Scrutiny: S corps are more likely to be audited because the IRS wants to check that they’re adhering to the “reasonable salary” requirements.
• Additional Accounting and Bookkeeping: Paying yourself (and paying your taxes) as an owner-employee will require more detailed accounting and bookkeeping. You might also incur additional administrative costs to hire an accountant to help you stay on track.

Disadvantages of S Corp Status for C Corporations

S corporation status also has its downsides:

• Limited Number of Shareholders: S corporations can’t have more than 100 shareholders; C corporations don’t have that restriction. 
• Limited Types of Shareholders: S corporation shareholders can only be U.S. citizens, certain trusts, or estates. C corporations don’t have that restriction, meaning S corp status might not be right for large international corporations. 
• One Class of Stock: C corporations sometimes attract investors by offering preferred stock. The IRS doesn’t allow this for S corps, which can only offer one class of stock.
• More IRS Scrutiny: The IRS is more likely to audit an S corp to check that the appropriate taxes are paid each year.

We can’t stress enough how important it is to have tax guidance about your specific situation from a qualified tax professional. An accountant with S corp experience should be able to make sure you stay in compliance with the IRS, and they may also be able to help you find additional tax savings you were unaware of.

S Corp Tax Calculator

The S Corporation tax calculator below lets you choose how much to withdraw from your business each year, and how much of it you will take as salary (with the rest being taken as a distribution.) It will then show you how much money you can save in taxes.

Disclaimer: The savings estimate provided by this tool is for informational purposes only and should not be considered financial, tax, or legal advice. Actual savings may vary depending on individual circumstances and other factors. We recommend consulting with a qualified tax or legal professional before making any decisions regarding your business entity. ZenBusiness, Inc. is not responsible for any actions taken based on the information provided by this tool. Use of this tool does not establish any client relationship with ZenBusiness, Inc.

New York S Corp vs C Corp, S Corp vs LLC — The Main Differences 

In New York, choosing the right business structure is crucial as it affects your company’s legal exposure, tax obligations, and operational flexibility. An S corp is a tax status that can be elected by corporations or LLCs, providing potential tax benefits that differ from other entity structures.

New York S Corp vs C Corp

A C corporation (C corp) is a legal entity recognized as separate from those who own, manage, and operate it. This separation offers liability protection to the shareholders, meaning their personal assets are usually protected from business liabilities. C corps are taxed at the corporate level, and any distributed profits in the form of dividends are taxed again on the shareholders’ personal tax returns, leading to double taxation. C corps file their taxes using IRS Form 1120.

Electing S corp status for your corporation in New York can alleviate the burden of double taxation. As an S corporation, profits and losses are passed through directly to the shareholders’ personal tax returns, similar to the taxation structure of sole proprietorships or partnerships. This pass-through taxation means profits are only taxed once at the individual level, potentially resulting in significant tax savings.

S Corp vs LLC in New York

A limited liability company in New York provides liability protection akin to that of a corporation, shielding owners’ personal assets from business debts and liabilities. LLCs offer great flexibility in management structure; they can be managed by one or more managers or directly by the members themselves. Additionally, an LLC is a pass-through entity for tax purposes by default, meaning the business itself doesn’t pay taxes on profits — instead, the profits and losses are reported on the personal tax returns of the members.

Forming an LLC in New York also brings the benefit of limited liability protection, which secures the personal assets of the owners from business-related lawsuits or debts. Furthermore, LLCs enjoy flexible taxation options, allowing them to choose the best tax structure that fits their needs — whether as a disregarded entity, partnership, or even electing to be taxed as an S corp or C corp. This flexibility and protection make LLCs a compelling choice for many business owners in New York.

Adding S corp status to an LLC maintains all of the above benefits. But as an added perk, an S corp can pay its members like owner-employees. This can (for some businesses) result in a break on self-employment taxes for the members.

Related article: File a New Jersey S Corp

Get help establishing a New York LLC with S corp tax election

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When you’re ready to take the leap, we can help you form a New York LLC with an S corporation designation and provide you with valuable support for all of your business needs moving forward.