With the third-largest economy in the nation, starting a business in New York is an extraordinary choice for entrepreneurs.
Entrepreneurs launching a new company in New York, United States of America (USA) must endure strong competition, a high cost of living, and elevated tax rates. However, the benefits far outweigh the disadvantages: businesses in New York have a much higher ceiling than those in other states and benefit from easier access to investors and top-rate incubator and accelerator programs.
In order to make the difficult process of building a company from the ground up in New York easier for developing entrepreneurs, Damalion put together this detailed guide. We’ll take you through each step, from turning your idea into a full-fledged business plan, to making your business official with the New York state government.
Steps to Starting a business in New York
Develop an idea
Every profitable business starts with a good idea. Take some time to study and research ideas for your next business in the United States of America. Take into consideration your own interests, skills, assets, availability, and the reasons why you want to form a business. You should also consider the probability of success based on the interests and needs of your community. And ask yourself how your business idea refines an existing product or service?
Do the research about your future New York business
Once you have an idea, it’s time to decide if it’s viable in the New York market. Conduct market research on who your target market is, on what makes your business unique compared to the competition, and how big the demand for your product/service is in New York.
Coming up with reasonable solutions may require refinement, or even a total overhaul, of your original idea. Be patient, you’ll only want to continue with the next steps after determining that a niche exists in the New York market for your business idea.
Draft a business plan
An extraordinary business plan should chart the path of your company from early stages to progress while having the option to draw in investors to provide financing.
Your business plan ought to include an overview on why it will be successful, market research, product or service description, a marketing plan for attracting customers, the money you’ll need in the next five years to grow the business and how you’ll spend it, and data providing a financial forecast for the business.
Secure funding through various New York capital funding
Every business needs money to get off the ground and in the event you aren’t wealthy enough to self-fund your business, you can choose from a number of other funding options. These include a loan from the U.S. Small Business Administration, taking out a loan from a commercial bank, launching an equity crowdfunding campaign, or securing funding from an investor who invests their personal finances in a startup, or a venture capitalist group active in New York. Which choice you choose depends on the specifics of your business.
Decide on a Legal Business Structure
The most popular legal structures for a small business are:
- Sole proprietorship, which is the name for running a business by yourself, with no separate legal entity for you and your business.
- Partnership, which is legally identical to a sole proprietorship, except that it comprises two or more people.
- Corporations, which is a complex legal structure that is a separate entity from the owner and comprises directors, officers, and shareholders.
- Limited liability company (LLC) which is a hybrid entity between a sole proprietorship and a corporation that possesses advantages of both.
You should carefully consider which business entity structure offers the type of liability protection you want, the best tax, financing, and financial benefits for you and your business.
Choose a Name
For LLCs and corporations, you are required to check that your name is distinct from the names of other business entities already on file with the New York Department of State in order to make your business unique. You can reserve an available name for 60 days by documenting an Application for Reservation of Name with the New York DOS. And if your New York sole proprietorship or partnership use a business name that is different from the name of the business owner or the names of the partners, you must document a fictitious name certificate with the county clerk in the county where you will do business.
Register your business
After deciding on the entity your business will take, it’s time to make your business official with the state of New York. The steps of this process vary depending on whether you are forming a sole proprietorship, an LLC, or a corporation.
- Sole proprietorship: To solidify a sole proprietorship in New York, you don’t need to file any organizational documents with the state.
- Partnership: To create a general partnership in New York, you don’t need to file any organizational documents with the state. Although, it’s recommended that all partnerships should have a written partnership agreement. The partnership agreement can be very useful if there is ever a dispute among the partners.
- LLCs: To create an LLC in New York, you must file articles of organization with the New York DOS. You will also need to appoint a registered agent in New York for service of process. In addition, you also should prepare an operating agreement to establish the basic rules about how your LLC will operate.
- Corporations: To create a corporation in New York, you must file a certificate of incorporation with the New York DOS. You will also need to appoint a registered agent in New York for service of process. You should also prepare bylaws to establish your corporation’s internal operating rules.
Open business banking and credit accounts in New York
Opening a bank account for your business is important because it allows you to separate company assets from your personal assets, it also makes filing taxes a lot easier. This is a highly recommended step, even if you are operating a sole proprietorship.
It’s also a wise idea to obtain a credit card for your business because it will help you isolate business expenses and build up credit for your company, which might help in getting interests in later stages.
Apply for Licenses and Permits
- Tax Registration – If you will be selling goods in New York, you must register with the New York Department of Taxation and Finance as a sales tax vendor. If you will have employees in New York, you must register with the New York Department of Labor for employer withholding tax and unemployment insurance.
- EIN – If your business has employees or is taxed separately from you, you must obtain a federal Employer Identification Number from the IRS. Even if you are not required to obtain an EIN, there are often business reasons for doing so. Banks often require an EIN to open an account in the business’s name, and other companies you do business with may require an EIN to process payments.
- Regulatory licenses and permits – These cover areas such as health, safety, environment, building and construction, and specific industries or services.
- Professional and occupational licenses – These cover people who work in various fields.
Choose a location
Whether you are running an internet-based business or opening a restaurant, location is everything. Be aware of the demographics of the neighborhood you are considering.
It is important to verify that the spot is zoned for your type of business. You might find zoning regulations for your town or city by surveying your local ordinances and contacting your town’s zoning or planning department.
Apply for a Federal Tax ID
All employers are mandated to obtain a federal tax ID, which is also called an Employer ID Number or EIN. DBAs (Assumed Names in NY) aren’t required to file for an EIN, but it’s recommended to keep business and personal matters diverse. Your EIN is like a social security number for your business. If you don’t have one, you’ll have to use your social security number on business legal and tax documents. Remember, using an EIN can help prevent identity theft.
Get insured for your future business in New York
Regardless of what kind of business you structure, buying insurance coverage to protect yourself in the case of property damage, the fallout of unexpected disasters such as personal injury lawsuits or legal action is a good idea.
In fact, businesses with employees are expected by the federal government to have two types of insurance, while others are strongly encouraged, or required at the state level, depending on your business type.
Ready to start a New York business? Reach out to us at Damalion, we’ve got your back.
