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Corporations (S Corps) can be a good option for businesses seeking a flexible and tax-efficient business structure. In essence, they combine elements of a corporation and a partnership. S Corps protect shareholders from liability and eliminate the double taxation associated with C Corporations.

Every state has its own requirements for forming an S Corp. New York provides several advantages for S Corps, including a lower tax rate and some tax exemptions. This guide will cover how to form an S Corp in New York.

Requirements for starting an S Corp in New York

New York’s eligibility requirements specify the structure, ownership, paperwork, and filing criteria for starting an S Corp.

Eligibility criteria

To form an S Corp in New York, your business must first be a domestic corporation, which means it must be incorporated within the state. It can’t be an ineligible corporation, such as an investment company, insurance company, or financial institution that uses the reserve method of accounting for bad debts.

Shareholder requirements

An S Corp can’t have more than 100 shareholders. Shareholders must be U.S. citizens or residents, estates, certain trusts, or tax-exempt organizations. This limitation means that other corporations, partnerships, and non-resident aliens cannot hold shares in an S Corp.

Ownership restrictions

S Corps can only have one class of stock, so all shareholders must have equal rights to profits, distributions, and liquidation proceeds.

Although voting and non-voting stock are permitted, the financial rights associated with each share must be identical.

Paperwork and documentation

You’ll need to fill out the following specific paperwork and documentation when you’re forming your S Corp:

  • Articles of Incorporation: The Articles of Incorporation, also known as a Certificate of Incorporation in New York, outline the basic information about your company. They typically include the corporation's name and purpose, the name and address of the registered agent, the number of authorized shares of stock, and the incorporator's name and signature. You need to file this with the New York Department of State, Division of Corporations.
  • Certificate of Incorporation: The Department of State will issue a formal Certificate of Incorporation to confirm the legal existence of your corporation. This certificate serves as proof that your corporation has been properly registered and is authorized to conduct business within the state.
  • Bylaws: Bylaws are the internal governing documents that outline the rules and procedures for managing your S Corp. They include provisions related to shareholder meetings, the board of directors' composition and responsibilities, officer roles, and procedures for amending the bylaws. While it is not required to file the bylaws with the state, they provide a clear framework for decision-making and dispute resolution. They can also hep you demonstrate to financial institutions, investors, and the IRS that your S Corp is a legitimate and well-organized business entity.

Filing fees and taxes

You’ll have to pay a filing fee and make sure your S Corp pays New York State taxes.

Filing fee for Articles of Incorporation

You must file the Articles of Incorporation with the New York Department of State, Division of Corporations. The filing fee is $125.

New York State corporate tax

S Corps in New York enjoy a unique tax structure due to their pass-through status, so the corporation itself is generally not subject to federal income tax. Instead, shareholders report their share of the corporation's income, deductions, and credits on their individual tax returns. However, New York State imposes a fixed-dollar minimum (FDM) tax on S Corps, which is determined by the company's New York receipts.

S Corps may also be subject to other taxes, such as payroll taxes and sales taxes, depending on the nature of the business. If your S Corp has employees, it is responsible for withholding state and federal income taxes, as well as Social Security and Medicare taxes, from their wages.

Steps to starting an S Corp in New York

Although it’s a little complicated to set up an S Corp in NY, the following steps will help guide you.

Choose a name for your S Corp

Conduct a name availability search and reserve the name to ensure it remains available until you can file your Articles of Incorporation.

Before registering your S Corp in New York, you can check the Department of State's website to see if the name is available and not already in use by another business. It must include a corporate designator, such as "Incorporated," "Corporation," "Limited," or an abbreviation of one.

Reserving your name is optional but can be useful if you need additional time to prepare your incorporation documents. In New York, you can reserve a corporate name by filing an Application for Reservation of Name with the Department of State, Division of Corporations, along with the $20 reservation fee.

Select a registered agent

A registered agent serves as the primary contact between your corporation and the state, ensuring that your business remains informed and compliant with legal requirements.

A registered agent is designated to receive official legal and government documents on behalf of your S Corp. The primary responsibilities of a registered agent include receiving legal notices, important tax documents, and other government correspondence.

Your agent must have a physical street address within the state of New York and be available during regular business hours to receive documents. You can choose to act as your own registered agent if you meet these requirements, or you can appoint another individual, such as an attorney, accountant, or trusted associate.

File Articles of Incorporation

The Articles of Incorporation serve as the foundation of your S Corp.

The Articles of Incorporation requirements include:

  • Corporation name
  • Purpose
  • Registered agent
  • Stock information
  • Incorporators

How to file: Submit the completed document along with the filing fee to the New York Department of State, Division of Corporations by mail or online through the department's e-filing system. Once your Articles of Incorporation have been filed and approved, your corporation will be officially registered and authorized to conduct business in New York.

Obtain any necessary permits and licenses

To determine the specific permits and licenses required for your S Corp, consult the New York State Business Express website, which provides resources and guidance on licensing requirements.

General business permits and licenses may include a sales tax permit, employer identification number (EIN), or a local business license from your city or county. Research the specific requirements for your area and ensure that your corporation is compliant with all necessary local, state, and federal regulations.

You may also need industry-specific permits and licenses depending on the nature of your business. For example, businesses in the food service, healthcare, or construction industries may need to obtain special licenses and permits to operate legally.

Hold your first board of directors meeting

Your board of directors will need to meet to make decisions about your new S Corp.

The first board of directors meeting, also known as the organizational meeting, is held to officially establish the corporation's initial management structure, adopt the bylaws, and address other essential matters necessary to set the foundation for your S Corp's operations.

During the first board of directors meeting, you should address several key items, including:

  • Election of officers: The board should elect the officers who will manage the day-to-day operations of the corporation, such as the president, vice president, secretary, and treasurer.
  • Adoption of bylaws: The board should review and adopt the corporation's bylaws, which outline the rules and procedures for managing the business and addressing various corporate matters.
  • Issuance of stock: The board should authorize the issuance of shares to the initial shareholders and determine the price and terms of the stock issuance.
  • Appointment of committees: The board may choose to appoint committees to handle specific tasks or responsibilities, such as an audit committee or a compensation committee.
  • Bank accounts: The board should authorize the opening of corporate bank accounts and designate the officers who will have signing authority on those accounts. (If you don’t have one yet, consider Novo’s no-fee business checking account.)
  • Corporate records: The board should ensure that a system is in place for maintaining accurate corporate records, including meeting minutes, financial statements, and stock ledgers.

Compliance requirements for S Corps in New York

You’ll need to file annual paperwork to maintain your S Corp status in NY, including:

Biennial report

New York does not require S Corps to file an annual report. However, you'll need to file a biennial report every two years that includes:

  • Your CEO's name and address
  • The street address of your main executive office
  • The address where you'll receive copies of paperwork from the NY Secretary of State
  • How many board members you have, and how many are women

Business taxes

New York State imposes a fixed-dollar minimum (FDM) tax on S Corps based on the company's NY receipts, which ranges from $25 to $200,000. Consult the most recent tax brackets and regulations from the New York State Department of Taxation and Finance to ensure accurate tax calculations and compliance.

Employee taxes

If your S Corp has employees, you are responsible for withholding state and federal income taxes, as well as Social Security and Medicare taxes, from their wages. You may also be required to pay unemployment insurance taxes and carry workers' compensation insurance.

Other compliance obligations

You may also have to comply with other regulations, depending on the nature of your business.

Business licenses and permits

Depending on your business activities and location, your S Corp may need to obtain certain permits and licenses to operate legally, such as a sales tax permit or industry-specific permits and licenses required by local, state, or federal regulatory agencies.

Insurance requirements

Your S Corp may need to maintain various types of business insurance coverage, such as general liability insurance, property insurance, and workers' compensation insurance.

New York-specific considerations

You should be aware of some specific considerations when forming an S Corp in NY.

Publication requirement

New York State requires newly formed corporations, including S Corps, to publish a notice of their formation in two newspapers—one daily and one weekly—within 120 days of filing the Certificate of Incorporation. The newspapers must be designated by the county clerk in the county where the corporation's office is located. The notice must be published for six consecutive weeks, and upon completion, you will receive an Affidavit of Publication from each newspaper.

You must then submit a Certificate of Publication, along with the affidavits, to the New York Department of State and pay the required filing fee. Failure to meet the publication requirement can lead to penalties and suspension of the corporation's authority to do business in New York.

Professional corporations

Certain professions in New York, such as attorneys, accountants, architects, and engineers, are required to form a professional corporation (PC) or professional service corporation (PSC) instead of a standard corporation. These entities have specific rules and regulations governing their operations, and they may also be eligible for S Corp status.

New York City business requirements

If you plan to operate your S Corp within New York City, be aware that the city has additional regulations, permits, and licensing requirements that you must comply with. For example, New York City imposes a separate General Corporation Tax (GCT) on corporations that conduct business within the city.

State incentive programs

New York State offers various incentive programs to encourage business growth and development. These programs may provide tax credits, grants, loans, or other benefits to eligible businesses. Some of the programs include the Excelsior Jobs Program, the Start-Up NY program, and the Minority and Women-Owned Business Development and Lending Program. Research these and other state programs to determine if your S Corp may qualify for any incentives or assistance.

Next steps in starting an S Corp in New York

Forming an S Corp in New York can offer numerous benefits for entrepreneurs looking to grow their businesses, including tax advantages and limited liability protection. To get started, you'll need to choose a name, appoint a registered agent, submit the required paperwork, and draft bylaws. Once your S Corp is formed, you'll need to comply with ongoing requirements, such as holding shareholder and director meetings, maintaining accurate financial records, filing annual reports with the New York Department of State, and meeting tax obligations at the federal, state, and local levels.

As you remain compliant with ongoing requirements, you can set the stage for success in the state's thriving economic landscape. It's a good idea to leverage available resources and support, such as the SBDC, the New York State Business Express, and local chambers of commerce, to strengthen your foundation for a prosperous S Corp in New York.

Novo Platform Inc. strives to provide accurate information but cannot guarantee that this content is correct, complete, or up-to-date. This page is for informational purposes only and is not financial or legal advice nor an endorsement of any third-party products or services. All products and services are presented without warranty. Novo Platform Inc. does not provide any financial or legal advice, and you should consult your own financial, legal, or tax advisors.

Novo is a fintech, not a bank. Banking services provided by Middlesex Federal Savings, F.A.: Member FDIC.

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