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New York is a state that’s heavy on taxation and regulation, but it’s also an entrepreneurial challenge that draws millions. Starting a business in New York, can seem like an overwhelming task, especially in the Big Apple. We’ve put together a step-by-step guide to help you turn your business ideas into a reality.
Begin by writing a business plan. This will serve as your guide for both startup and growth in the Empire State. Investors, grantors, and loan officers will review this document to determine your business’s financial viability.
When writing the business plan, flesh out the following:
To register your business in New York and with the IRS, you’ll first need to choose a business structure that best suits your tax and legal situation. The options are corporation, limited liability company (LLC), or sole proprietorship. Two of the most commonly chosen structures are sole proprietorship and LLC.
A sole proprietorship is the simplest business structure to create. It’s not registered with the state, is free to set up, and designates all profits to the sole owner.
An LLC is incorporated with the state, costs money to create, and offers liability protection. These liability protections safeguard the owner’s assets (like home and car) if the company is sued or ends up in debt.
Corporations can be designated as S or C corps. In other states, an S corp is often the preferred corporate designation if a company is using the corporate structure. S corps, however, are not recognized in New York and are therefore subjected to an 8.85% general corporation tax. In contrast, an LLC structure is taxed a 4% unincorporated business tax in New York.
If you choose LLC for your business entity type, you’ll file New York Articles of Organization to legally form your business. Working with a professional formation, registered agent, and compliance service like ZenBusiness can help you keep things simple.
The New York State Department of Taxation and Finance can offer more information about the taxes due for New York businesses. New York Business Express has an online wizard to help you decide which legal structure could work best for you.
It’s important to calculate your business costs before starting a business in New York.
As you create a list of projected costs, perhaps categorize them as fixed, ongoing, or one-time.
Unsure about whether you’re estimating the right amounts? The New York Small Business Development Center provides counselors free of charge who can help walk you through the process of listing your business costs.
For starters, estimate the price to start a small business.
What are your fixed costs? Fixed costs may change over time but are stable for set periods, such as an annual lease. They include insurance, utilities, leases, and mortgages.
What are your variable costs? These recurring costs fluctuate and can cover payroll, taxes, supplies, cleaning products, and fuel.
Consider your industry and target market. For instance, if you’re running a cleaning business: Residential cleaning will have different costs, requirements, and expectations than commercial cleaning.
Specialty niches, such as carpet cleaning or chimney sweeping, will also have their own niche considerations. Other factors may affect the costs you have for servicing your target markets, such as a preference for environmentally-friendly cleaners, or additional sanitation requirements due to the COVID-19 pandemic.
To give you a general idea of the costs you may face, here are common startup expenses for a low-cost cleaning business:
Your cleaning equipment and products may range from $300 to $600. High-quality, commercial-quality vacuum cleaners can cost hundreds of dollars, but all-purpose cleaning solutions can be as low as $10. Brooms, mops, and other basic dusting supplies can be procured for less than $50.
Don’t neglect advertising, marketing, and labor costs either. Expect to invest up to $200 for print and online marketing, such as printing business cards and setting up a basic website. Typical cleaning job labor costs start at an hourly rate of $12 per employee. Adjust depending on prevailing rates in your area.
Ready to name this beautiful business idea of yours? It’s a crowded professional landscape in New York, so try to come up with a business name that is memorable, easy to understand, and not yet in use. Yes, that’s a tall order in New York, but you can do it!
Think about words that are used in your industry or to describe your product(s)/service(s). Maybe incorporate your own name or initials into the business name.
Once you have a list of possibilities, check to see which names are available with the NY Department of State. (You definitely don’t want to get sued by a business that’s already using the name!) After you’ve checked the real world, check online, too. Are the website address and social media presences for your business name available?
When you land on a name that meets all these criteria, register the domain and social media presence.
Using the structure and name you selected, register the business with the state of New York.
Also, obtain a federal employer identification number (EIN) from the IRS if you’re operating as anything other than a sole prop (for which you can just use your social security number if you prefer).
You’ll need paperwork from both of these actions to then open a business bank account. It can be tempting to just run the business money through your existing personal accounts, but it’s not a good idea. This can affect the liability protection afforded to your personal assets and wreak havoc when it comes time to file taxes.
Check with the state of New York Division of Licensing and your local municipality to determine whether you need permits or business licenses.
Finally, learn about business insurance in New York and which type(s) you may need. If you intend to have any employees as part of your LLC or corporation, workers’ compensation insurance and disability benefits insurance are a must.
Marketing a business in New York can be tough. You’ll need to break through a lot of noise to reach the intended eyeballs.
Optimize your website for search engines, and create a social media strategy that you’ll execute faithfully. Or hire someone to handle that for you. Think Twitter, LinkedIn, Facebook, TikTok, Snapchat, Pinterest, and the like.
Register the business location with Google My Business so people can find you. Make your signage as noticeable as allowed (if you have a physical location), and don’t be shy with the business cards or flyer postings.
Although there are some tax incentives for new businesses, the main benefit of opening a business in New York is the accomplishment. With more than 2 million small businesses operating there already, this is a tough environment for entrepreneurs. Rising to that challenge proves your mettle.
The state does provide a competitive and diverse workforce and entrepreneurial environment, as noted by the Small Business Administration (SBA). Also, you don’t necessarily have to operate in NYC to benefit from being near it. Sharone Ben-Harosh, founder and CEO of FlatRate Moving, told Business News Daily, “Location-wise, there’s a big opportunity in the Westchester area as a result of more people moving away from New York City.”
As with all entrepreneurs, opening your own business also gives you control over your life, time, and focus.
New York State has a wide variety of industries both in its most well-known city and the rest of the state. It’s home to agriculture (dairy, apples, cattle and calves, greenhouse and nursery products, and hay), manufacturing (pharmaceuticals, photographic chemicals, industrial equipment), mining (limestone, salt, sand, garnets, zinc), and service providers (finance, insurance, real estate).
IBM, Deloitte, PepsiCo, JPMorgan Chase, and PricewaterhouseCoopers are the top businesses in the state. The best small businesses to work for include Giant Machines, Eden Health, 7Park Data, adMarketplace, Alloy, and Catalyst Software. Consider starting up a New York company that serves those businesses or competes with them. Auto repair shops, consultancies, food trucks, coffee shops, and boutiques are all good businesses to start in the state.
The bottom line is that New York is a competitive place to start a business. Its taxes, filing fees, and regulation are expensive and not as easy to navigate as those of other states. At the same time, it’s the ultimate proving ground for entrepreneurs. NYC alone offers an enormous workforce and customer pool for businesses. And headquartering anywhere in the state puts you in proximity to the most well-known city for business in the United States.
Obviously, New York City offers an incredibly large and diverse workforce. Other cities in the state to consider include its capital, Albany, as well as Syracuse, Buffalo, and Rochester.
New York’s Department of Taxation and Finance can assist with determining which taxes and regulations apply to your specific business.