If you’re thinking about starting a business in New York, you face numerous challenges ahead. While entrepreneurship can be highly rewarding, it’s also important to plan for obstacles and how to get around them before getting started. Below, we discuss some things to know about owning a business in New York State and how to know if it’s the right place for you.
The Importance of Doing Research Before Starting a Business
No matter where you are, it’s critical to have a clear understanding of the regulations, tax laws, and formation costs before deciding whether or not to start a business in the area. You also want to have a good idea of potential sources of funding and local talent pools in the region to make sure your company will have ongoing access to capital and human resources.
Make sure you have the ability to abide by all applicable laws established by municipal, state, and federal governing agencies before starting your business to avoid potential fines and other legal ramifications. This can help protect you, your employees, and your resources from the consequences of violating regulations you weren’t aware of or didn’t know about.
5 Things to Know About Starting a Business in New York
The business landscape in New York is incredibly competitive, more so the closer you get to Manhattan, so it’s important to understand how to navigate the formation of a business in the area. Here are some things entrepreneurs should consider before getting started:
1. High Formation Costs Compared To Other States
Starting a corporation in New York State requires more time and money than it does in many other states, but for many business owners, the location’s benefits outweigh the additional expenses. Despite the higher formation costs, the area offers a highly educated workforce, venture capital opportunities, and an active consumer base.
- Corporations – To form a corporation in New York, you must file Articles of Incorporation with the Department of State, which costs $125.
- LLCs – To form an LLC in New York, you must file Articles of Organization also with the Department of State, for a fee of $200.
- Business name – Regardless of which organizational structure you choose, there is a $20 cost to reserve a business name.
- DBA – If you choose to use a DBA, you will pay a $25 filing fee if you have an LLC or LLP. If you own a corporation, you will pay a $25 fee for each DBA in each non-NYC county you plan to operate in. If you plan to operate in NYC as a corporation, you will pay a $100 fee for each DBA in each of the five NYC boroughs.
- Registered agent – New York State requires business owners to have a registered agent, or a designated person to receive service of process. The agent receives mail on behalf of the business, which includes court summons and other legal documentation. Depending on who serves as your company’s registered agent, this could cost nothing or even up to a few hundred dollars a year if you choose to use a registered agent service.
- Certificate of Publication – When you register an LLC in NY you’re required by the state to publish notices in two newspapers or other suitable publications in the counties in which they intend to do business upon their formation. These costs vary depending on the newspaper and in addition there’s a $50 filing fee for a certificate of publication.
2. Taxes Are Higher, Too
New York is well known for having high taxes both for businesses and consumers, so it’s important to take these into consideration when starting a business in the state. These costs are even higher in the city – for example, the state corporate income tax rate is 6.50% to 7.25%, while the rate for corporations in the city soars to 8.85% regardless of revenue. This means that businesses operating within NYC have to pay an additional 2.35% in taxes compared to those located elsewhere in the state.
3. Regulations are Complex
New York has a complex set of regulations that businesses must adhere to if they want to be able to conduct transactions within the state. Entrepreneurs should have a good understanding of the regulations that apply to them and how those will be met before starting their businesses.
The last thing you want is to find out that you’ve broken a law you didn’t know about or weren’t sure of after the fact. In most cases, “I didn’t know” isn’t a good enough defense and business owners are still required to pay any associated fines or incur other consequences if they are found to be in violation.
Depending on where your company is located, you may need to obtain additional licenses or permits from local authorities like the County Clerk or city government before you can legally operate your business in that area. Which licenses are needed by what governing entities vary widely based upon what kind of services you plan on providing, so it’s imperative to do adequate research or hire a professional service and prepare for the permits you’ll need ahead of time.
4. NYC’s Business Landscape Is Forever Changed After COVID-19
COVID-19 radically changed the business landscape in New York City and the economy still hasn’t returned to its pre-pandemic state. The city’s economy was already in a difficult situation before the pandemic hit, with many businesses struggling to keep their doors open and employees on payroll. NYC was the first major city to be bombarded by the virus at a time when scientists and doctors knew little about it and no vaccinations or treatments were available at the time.
The effect of the coronavirus on small businesses in New York City has been devastating. Many local businesses had to close their doors permanently due to the financial losses and government restrictions put in place to protect public health, and those that have remained open have had to adapt their operations accordingly to survive reduced foot traffic and a reduction in the use of non-essential services like entertainment and dine-in restaurants.
Entrepreneurs that are interested in opening a new business in New York, particularly in the city, should take time to research how companies in the area were impacted at the start of the pandemic and what business owners did to navigate the changes to remain operational.
5. Greater Access To Funding & Skilled Talent
Despite the higher costs of doing business in New York, the state has plenty of value to offer soon-to-be business owners. The city is home to some of the most talented and highly-skilled workers in the world, making it an ideal place for business owners who are looking for employees with specialized skills or knowledge in certain areas.
The presence of top universities such as Columbia University, NYU, and Cornell also helps attract new talent to the state, and the large number of venture capital firms also means there’s increased access to funding for entrepreneurs who want to start a business in the area.
Is Starting A Business In New York Right For You?
Before deciding to start a business in New York, take some time to assess the various financial and regulatory requirements and decide if you will be able to feasibly meet them on an ongoing basis. While starting a NY business offers you excellent opportunities to move up and ahead, you need to make sure your company will have the capacity to meet stringent state requirements every year you choose to operate within the state.
Tips For Registering Your New Business
Starting a business anywhere can be an intimidating process, especially if you are unfamiliar with the filing requirements and procedures. The complexity of New York laws and the area’s competitive landscape can make things seem even more difficult. To help simplify the process, here are some tips for registering your new business:
- Get your documents together. Make sure to have all necessary forms on hand, like your Articles of Incorporation or Organization, tax forms, DBA information, etc.
- Contact the Department of State. If you’re not sure how to get started, head to your Department of State’s office – they can provide you with the resources you need at the beginning of your entrepreneurship journey.
- Plan ahead for fees. Make sure you have enough money set aside for the cost of your license(s) and registration plus some, in case there are any fees you didn’t account for.
- Know what you need to do annually. Once you get past the initial stages, you might feel like you’re home-free. But it’s important to keep in mind that many costs are ongoing, such as those for a registered agent and biennial reports.
Starting a business in New York State – or anywhere else for that matter — can be a daunting task. But it can also be a rewarding one, especially in places like Manhattan where there’s a lot of foot traffic or where there are more skilled employees to choose from.
Ultimately, whether or not starting a business in New York is right for you depends on your goals as an entrepreneur, the type of company you want to run, and the local competition. By doing as much research as possible ahead of time and working with professionals when you can, you can increase the chances of long-term success.