How to Start an S Corp in New York
The state of New York has been at the forefront of businesses in many industries — from fashion and finance to restaurants — for decades. It has an incredible business landscape with the ideal location for the global market along with tax-based incentives, an abundance of resources and training for entrepreneurs, and much more.
Starting a business in any industry can seem overwhelming, though, given all the decisions that can impact its success and your ability to reinvest the profits in your company. One way you can save some money on your taxes involves forming your business as an S corporation (S corp). This guide covers everything you need to know about how to form your New York S corp and what you must do to keep it compliant.
Not in New York? Check out our other How to Start an S Corp guides to learn more.
Recommended: If you have at least $60,000 in net earnings, an S corp may offer tax advantages. Let Northwest start your S corp today.
Factors to Consider Before Starting an S Corp in New York
Before forming an S corp, you have to consider the following factors:
- Is an S corporation the best strategy for your business?
- S corporation requirements and restrictions
- Are S corp tax advantages right for you?
Is a New York S Corporation the Best Strategy for Your Business?
For help with choosing the right structure for your business, visit our Choosing a Business Structure guide.
S Corporation Requirements and Restrictions
The following are IRS S corp requirements and restrictions:
- Limited to one class of stock
- Must be domestic LLCs or corporations
- 100 shareholders
- Shareholders must:
- All agree to electing S corp status
- Be U.S. citizens or permanent resident aliens
- May not be partnerships, corporations or non-resident alien shareholders
- File biennial report on the month of incorporation and every other year with the Department of State’s Division of Corporations (cost: $9, failure to file may result in loss of good standing status in the state of New York and even dissolution). You may file online.
Are S Corp Tax Advantages Right for You?
An S corporation is a tax designation that can be elected by a limited liability company (LLC) or corporation. With an S corp, business owners are considered employees of the company and must receive a reasonable salary. Since all S corps technically have employees, the s corp must run payroll.
In order to benefit from a New York S corp tax designation, your business needs to make enough money to offset payroll expenses. Furthermore, S corps are beneficial for business owners who take large distributions in addition to their salary.
To learn more about the tax advantages of an S corp, read our LLC vs. S corp guide and take a look at our S Corp tax calculator.
For a Free Consultation with a Tax Professional
How to Form a New York S Corp
There are two main ways to start an S corp:
- By forming an LLC and electing S corp tax status from the IRS Form 2553 when you request your employee identification number (EIN). You must also file Form CT-6 from the New York Department of Taxation and Finance to officially be taxed as an S corporation.
- By forming a corporation and electing S corp status from the IRS Form 2553. You must also file Form CT-6 from the New York Department of Taxation and Finance to officially be taxed as an S corporation.
There are also specific deadlines when it comes to electing S corp status.
- If you want the S corp status to take effect the following year, you may file at any time in the previous year.
- If you’re filling within the same year, you must submit your application within 2 months and 15 days or before on the same calendar year (ie. March 15).
- For a new business, you must file within 2 months and 15 days after you start your company, based on the date on the Certificate of Incorporation, for the S corp tax status to take effect.
We recommend forming an LLC because it’s simpler and more cost-effective.
Recommended: If you have an existing LLC, visit our How to Convert an LLC to S Corp guide.
Steps for Forming an LLC and Electing S Corp Status in New York
Starting a New York LLC and electing S corp tax status is easy. You can use our guides to start an LLC with the S corp status yourself, or you can hire a service provider like Northwest to guide you through this process.
There are six basic steps to start an LLC and elect S corp status:
Step 1: Name Your LLC
Step 2: Choose a Registered Agent
Step 3: File the Articles of Organization
Step 4: Complete Publication Requirement
Step 5: Create an Operating Agreement
Step 6: Get an EIN, File Form 2553 to Elect S Corp Tax Status, and File Form CT-6
Step 1: Name Your LLC
Choosing a company name is the first and most important step in starting your LLC in New York.
Be sure to choose a name that complies with New York naming requirements and is easily searchable by potential clients.
1. Follow the naming guidelines for a New York LLC:
- Your name must include the phrase “limited liability company” or one of its abbreviations (LLC or L.L.C.).
- Your name cannot include words that could confuse your LLC with a government agency (FBI, Treasury, State Department, etc.).
- You must receive approval and/or meet certain conditions to include certain restricted or prohibited words.
- Your name must be distinguishable from any existing business in the state. This includes New York reserved names.
You can also read the New York state statute about LLC naming guidelines for more information.
2. Is the name available in New York? Make sure the name you want is available by searching the business entity database on the New York Department of State website.
3. Is the URL available? We recommend checking to see if your business name is available as a web domain. Even if you don't plan to create a business website today, you may want to buy the URL in order to prevent others from acquiring it.
Step 2: Choose Your New York Registered Agent
The New York Secretary of State acts as the statutory agent for service of process, or registered agent, for all businesses by default, but you can elect a registered agent for your New York LLC.
An LLC registered agent will accept legal documents and tax notices on your LLC's behalf. You will list your registered agent when you file your LLC's Articles of Organization.
Many business owners choose to hire a registered agent service. Many of these services will form your LLC for a small fee and include the first year of registered agent services for free.
Step 3: File the New York LLC Articles of Organization
The New York Articles of Organization is used to officially register an LLC.
File Your New York Articles of Organization
OPTION 1: File Online With the New York Department of State
File Online- OR -
OPTION 2: File Form DOS 1336 by Mail, by Fax, or In Person
Download FormState Filing Cost: $200, payable to the Department of State (Nonrefundable)
Filing Address:
Department of State Division of Corporations
State Records and Uniform Commercial Code
One Commerce Plaza
99 Washington Ave.
Albany, NY 12231
Fax: (518) 474-1418
Note: Faxed filings must include a Credit Card/Debit Card Authorization form.
Step 4: Complete Publication Requirement
You must publish a notice of LLC formation within 120 days of formation. This notice must be published in two newspapers (one weekly and one daily) for six consecutive weeks. The newspapers must be approved by the local county clerk in your Articles of Organization and be circulated in the county of the LLC’s principal office or designated registered agent’s office. Fees will vary by newspaper.
After publication, the printer or publisher of each newspaper will provide you with an affidavit of publication. You must submit these affidavits, along with a Certificate of Publication, to the New York Department of State
File Certificate of Publication with New York
File a Certificate of Publication With the New York Division of Corporations, State Records and Uniform Commercial Code
Download FormFee: $50, payable to the Department of State (Nonrefundable)
Read our full New York publication requirements guide to learn more.
Step 5: Create an LLC Operating Agreement
An LLC operating agreement is a legal document that outlines the ownership and member duties of your LLC.
For more information, read our New York LLC Operating Agreement guide.
Our operating agreement tool is a free resource for business owners.
Step 6: Get an EIN, Complete Form 2553 on the IRS Website, File Form CT-6
An EIN is a number that is used by the US Internal Revenue Service (IRS) to identify and tax businesses. It is essentially a Social Security number for a business.
EINs are free when you apply directly with the IRS.
Elect S Corp Tax Status
During the online EIN application, the IRS will provide a link to Form 2553, the Election By a Small Business form.
Visit our Form 2553 Instructions guide for detailed help with completing the form.
This is the form to elect S corp tax status for your LLC:
File Form CT-6
Form CT-6 is required for your New York LLC or corporation to be taxed as an S corp after electing an S corp tax status. You can complete and file Form CT-6 with the New York Department of Taxation and Finance.
Ready to start saving on your taxes?
We recommend using a formation service to start your New York S corp for you, so you can focus on the things that matter most — growing your business..
Keep Your New York S Corp Compliant
After setting up your business as an S corp in New York, you’ll want to ensure it remains in good standing. New York requires all businesses to pay local and state taxes annually and file a biennial report every other year.
New York S Corp Biennial Report
New York requires business corporations and LLCs to file a biennial statement — also known as a biennial report — with the New York Department of State’s Division of Corporations. While your business may be taxed as an S corp, this state still considers it an LLC. That means your business must file a biennial report.
The filing deadline is every two years on the anniversary of when you formed your S corp. While there’s no late fee, your business will lose its “good standing” status with the state if you fail to file on time. That could result in the dissolution of your business.
Visit our New York Biennial Statement guide for a step-by-step overview of the filing process.
New York S Corp Taxes
S corporations benefit from pass-through taxation, meaning the business’s profits pass-through to S corp owners’ individual tax returns. S corp owners make money from their reasonable salary and distributions, and New York S corp owners can expect to pay the following taxes:
Federal Self-Employment Taxes
Self-employment taxes cover social security and medicare. The self-employment tax rate is 15.3%, and money you take as salary will be subjected to the self-employment tax. However, distributions are not subjected to this tax.
Federal Income Taxes
Your federal income taxes will depend on your tax bracket, and the cutoffs for individual tax brackets as well as the percent owed will change each year. Both your salary and distributions are subjected to federal income tax.
New York Income Taxes
The state of New York has structured income tax brackets that range from 4% to 10.9%. In most states, S corps benefit from “pass-through” taxation. Pass-through taxation allows a business’s income to pass through to its owners, enabling them to pay personal income tax on those earnings on their individual tax returns.
Unlike most other states, New York requires S corps to pay the corporation franchise tax using the gross receipts method. This results in lower tax rates than for a traditional corporation. In addition, New York City and Yonkers residents have their own income tax rates. You can learn more at New York State’s Department of Taxation and Finance website.
New York Sales and Use Tax
The state of New York applies a sales tax to retail sales of certain tangible property and services. The state’s use tax applies if you purchase property and services to use within New York State. The sales tax rate is a total of 8.875%, which includes a city sales tax of 4.5%, a use tax of 4%, and a Metropolitan Commuter Transportation District surcharge of 0.375%.
Additional State Taxes
Additional taxes may apply to your New York business. New York State’s Department of Taxation and Finance provides details on these state-specific taxes. Some examples include:
- Alcoholic Beverages Tax
- Cigarette and Tobacco Products Tax
- Petroleum Business Tax
- Metropolitan Commuter Transportation Mobility Tax
- Gasoline and Similar Motor Fuel Tax
Visit New York State’s Department of Taxation and Finance website for more information.
New York Local Taxes
Businesses across New York State can, for the most part, expect the same taxes — except those operating in New York City and Yonkers. Check with your local municipality to make sure you understand any tax obligations that apply to your business.
Start a New York S Corp FAQ
An S corporation (S corp) is a tax designation that an LLC or a corporation can elect.
No. The default taxes for an LLC and taxes for an S corp are not the same.
With an S corp, owners pay personal income tax and self-employment tax on a predetermined salary. They may then withdraw any remaining profits from the business as a “distribution,” which isn’t subject to self-employment tax.
With an LLC, all company profits pass through to the owners’ personal tax returns, and then the owners must pay personal income tax and self-employment tax on the entire amount.
S corp owners are required to earn a “reasonable” salary, which basically means a fair market rate based on the individual’s qualifications as well as their duties and responsibilities at the company. The purpose of this requirement is to prevent S corp owners from paying themselves an artificially low salary in order to pay less self-employment tax.
A distribution is a dividend that a shareholder/owner can take from the business profits that remain after a company pays all of its employee salaries. Shareholders must pay personal income tax on distributions, but distributions aren’t subject to self-employment tax.
LLCs and corporations that operate under a “doing business as” (DBA) name can choose the S corp election.
New York State was made for businesses of all industries — from finance, trade, and healthcare to technology, manufacturing, and fashion. As one of the world’s top economic capitals, New York enables you to start a business in any industry and elect S corp status to potentially save on your taxes.
While New York does have a higher income tax than some states, it’s based on brackets that levy lower tax rates on businesses with lower earnings and higher rates on those with higher earnings. With its favorable business incentives, great location, and support for entrepreneurs, New York State is a great place to start a business with growth in mind.