9-Steps To Starting A Business Series: New York
New York State is a pillar of industry in the United States and dominates the business world today so it is an ideal location for small business startups.
New York State – The Empire State – is one of the first 13 colonies and where the first president, George Washington, was inaugurated on April 30, 1789, at Federal Hall on Wall St.
With such a rich and robust history in business, it makes sense entrepreneurs, like you, want to start their business in New York. But there can be tons of red tape and seemingly endless regulations to wade through on the journey. So, I’ve put together this guide to help you on your way.
Here’s how to start your new business in New York State step-by-step with helpful NYS government resources.
- ONE – Choose A Business Idea
- TWO – Business Formation Type
- Three – Business Licensing & Permits
- Four – Taxes
- Five – Financing
- Six – Product & Service Planning
- Seven – Marketing
- Eight – Personnel
- Nine – Building Set up
- 6 New York State Government Entrepreneur Resources
ONE – Choose A Business Idea
A business idea may be something that you’ve already got in mind. However, if you don’t, there are several unique businesses that you – the entrepreneur – can quickly launch and succeed with a little perseverance and hard work.
Looking for the best business ideas for New York City? Check out my list here
In a nutshell, there are two critical first steps:
- Choose A Business Idea
- Choose A Business Name
Choose A Business Idea
Decide on a business to start. It could in any number of industries, and there are seemingly endless possibilities. However, in New York State, 6 Industries drive the bulk of business within the state. (source)
- Financial Services
- Health Care
- Professional & Technical Services
- Retail Trade
- Educational Services
New York State companies lead all of these industries. From the influential businesses that make the New York Stock Exchange hum to the $31 billion in payroll alone for the State’s retail sector, New York is an entrepreneurial playground. (source)
Get inspired by my big list of small business ideas that are profitable here
Choose A Company Name
Many find naming a business to be one of the most challenging. Here’s why that is often the case.
First, many people choose a business name because they like it. It is often an incorrect way of naming a business and can be detrimental to the business owner.
And sometimes, choosing a name happens quickly and works very well for the business.
No matter the method of name selection, there are three essential things that the name should convey:
- What the business represents
- What the business offers
- Something memorable
For example, a new business might be called Lighting Professional Drycleaners. This name conveys that the company works quickly, is professional, and does a dry cleaning service. Although the name’s memorable nature is somewhat questionable, it is also a subjective question, so we’ll pass on worrying too much about it for this name.
Another name for a business such as Nike does not convey anything other than a brand. Now, this is fine if a company has millions of dollars to spend on marketing the brand. But most new businesses do not have this sort of branding budget. For this reason, new firms should stick to a simple name that attempts to succeed at the three aforementioned important things conveyed.
As you can see, much more can go into a name than face value might suggest.
The Essential Name Search
Before you think you’ve got the best business name ever, make sure someone else hasn’t claimed it as their business name first. Do a Business Entity Name Search here at the Department of State official site.
Don’t have a business idea yet? Try reading: Business Ideas Best For New York Entrepreneurs.
TWO – Business Formation Type
When you’ve got the name and business type you want to start, determining the best form of business structure is the next essential step.
There are many types and variations to business structure. Depending on which kind of business you intend to run, how the day-to-day operations will be carried out, and various other factors, a particular business structure may be of more value to you than another.
Out of the US’s possible business structure types, here are the most common five types for profit-oriented organizations.
Legal Requirements For Businesses In New York – Business Formation Types
- Sole Proprietor
- S Corporation
- Limited Liability Company (LLC)
A sole proprietorship is the business formation most commonly adopted by individuals. It is also the form of business that carries the most liability for the owner—a single owner, personally responsible for the sole proprietorship.
Similar to the sole proprietor, this business formation simply puts a partnered proprietorship rather than a sole proprietor. The liability is typically evenly dispersed amongst owners.
A corporation is a very different creature from a sole proprietorship. In the United States, a corporation is a sort of virtual entity. That is to say, a corporation takes on rights and abilities similar to a person. The difference is that it features the ability to exist perpetually, quickly transfer interests, and provide limited liability for the corporation’s shareholders (owners). (source)
An S Corporation differs from a regular corporation in that it chooses to pass credits, deductions, income, and losses through to the shareholders. These shareholders would add these to their income tax. It enables the business to simply pass along the numbers to the owners (shareholders) and act as intermediaries. (source)
Limited Liability Company (LLC)
The last common form of business structure found in New York State is the limited liability company. Each state has its regulations regarding the LLC, but to clarify how it differs from the other previously mentioned business formation types, let’s take a second to define the LLC.
An LLC can be thought of as a hybrid structure. It is sort of a mix between a corporation and a partnership. That is to say, one might think of it as a partnership that insulates the owner’s liability to some degree, similar to the corporation’s structure in that sense.
Although an LLC may appear to have some extraordinary benefits, several regulations have to be followed for this type of organization in New York State.
An LLC other than a theatrical production company with the words “limited liability company” in the company name must do the following within 120 days of forming. The company must publish a notice in two newspapers of the county where the LLC resides once per week for six weeks. The county clerk designates the target newspapers.
A certificate proving the publication must be submitted (with a $50 submission fee attached) or the LLC won’t be legally allowed to conduct business.
You can find out more about the LLC and other particular requirements here.
Want to learn more about legal requirements? Take a look at our article on legal business requirements here:
Three – Business Licensing & Permits
All businesses in the state of New York must be licensed. As mentioned above, when forming the company, there are several business structures that one might choose.
No matter the business type is chosen, there will be specific fees involved in licensing.
Ready to License Your Business?
Just go to the New York Department of State, Division of Corporations, State Records & UCC website for information about the following:
- Application for Reservation of Name
- Certificate of Incorporation
- Certificate of Incorporation (professional service)
- Certificate of Incorporation (benefit corporation)
Business Formation Tip – Speak with two people before you start your business: a) your lawyer, b) your accountant. These two professionals can help you avoid costly mistakes right from the start.
Four – Taxes
The two primary taxes most new business must deal with are sales tax, and the dreaded income tax we all know and wish did not exist.
For businesses operating in the state of New York, two necessary taxes need to be potentially charged to your clients.
- Sales Tax – This sales tax applies to certain kinds of tangible products as well as services.
- Use Tax – Use tax applies to products or services purchased out of state for use in the state of New York.
Sales taxes are charged on most tangible products. As well, sales taxes are levied on most services in New York.
With a few exceptions, such as food for home consumption, used product resale, and a few others, most other products and services must have sales tax added to the finals sale. (source)
Sales taxes levied within New York City may vary from those found in the rest of the state.
New York State And City Sales And Use Tax Resources
- New York City Department of Finance – Goods, Services, Sales And Use Tax Reference Chart
- New York State Official Information – Quick Reference Guide for Taxable and Exempt Property and Services
Income Taxes And Your New Business
There is no escaping two things in life: death and taxes. And so, here is the handy resource to help you figure out your new business taxes.
Do yourself a favor and heed the advice above regarding the two people one ought to consult before starting a business – a lawyer and an accountant.
When it comes to sole proprietorships, the taxes are relatively straightforward. With all other forms of business structure, simplicity is muddied with multiple forms and regulations. It is easiest to budget into the business expenses to have the use and direction of a professional accountant to keep your business on track for success.
Five – Financing
Any business operates on the principle of profit versus expenses. One cannot foreseeably hope that a company will succeed without knowing the basic math behind its operations.
It leads us to our highly important fifth step to starting a business – knowing your business finances.
Take a look at our article about calculating your business startup costs here. It’s an essential resource to help guide you through this valuation process.
Financial Planning For Your New Business
In essence, you’ll need to figure out all your expenses, both for the initial startup as well as your ongoing operating costs. And some of those startup costs may be tax-deductible, so best to find out first.
Then a comprehensive forecast of product and/or service sales to determine an overall projected income for the business.
This seemingly simple calculation makes the difference between a business that can manipulate its strategy for success and one that buries itself in its ignorance.
Many new businesses may require more than their on-hand capital for a smooth and successful startup. Take a look at this resource of 17 Proven Sources For Startup Capital.
In order too process payments, your business will require a separate bank account. Unless doing a small amount of business as a sole proprietor, an individual account may not be necessary.
However, for any corporations, LLC’s and so forth, a separate and individual bank account will be necessary.
Often to open an account, the account holder must have multiple documents such as a business license, letter of incorporation, personal identification, and a cash deposit to get a business account started.
Depending on the bank and type of account required, several business days may be needed to get things set up, so don’t wait until the last minute to get things set up.
Whether you’re starting a sole proprietorship or an LLC, having the proper accounting setup is essential. And the better to have said setup established from the beginning rather than find out down the road that you’ve done things wrong and now owe money to the IRS.
Depending on the particular business formation type you have chosen, there may be reporting requirements for the accounting that require regular and ongoing attention.
The case is proven to be the point when talking about payroll in particular. The remittance must be ongoing and regularly made to avoid penalties. Consult the IRS for your particular payment and reporting schedule.
Six – Product & Service Planning
After the preliminary red tape has been addressed, the next phase of starting your company in New York State is to have your products and services organized.
One would assume that you’ve run your numbers on the services, products, or both that you intend to offer with the company. It is often an essential consideration of the financial planning process.
With this in mind, the entire process of products and services ought to be revisited at this stage if previously considered. If not, then it is time to ascertain your wholesale process of products or services.
If you’re in need of finding some wholesale products to sell, take a look here at our article on Finding Wholesale Products for your business in New York.
The products you decide to sell will inevitably require a price. It should be considered against the cost of expenses as well as projected sales. And naturally, one must take current market value into account. For more information, take a look at our article on 5 Pricing Strategies For Small Business to help guide you through the pricing process.
Seven – Marketing
Remember earlier when we discussed business names? Consider the difference between our two examples: Lighting Professional Drycleaning versus Nike. If you chose the second group of names (those that don’t convey the three principles discussed earlier), you would require a healthy marketing plan to get the name out.
Even if your business uses a name that meets the three principles, it’s not enough to simply have a name – you need people to know about your business, so the phone starts ringing.
Branding your business involves more than just naming the company. It also involves having a logo, often a particular font, and even a slogan for your business. Also, company colors should be chosen. This package is called your branding package, and it’s essential.
Advertising comes in many forms, from billboards to a website to a storefront sign. In the good old days, there was a focus on flyers, and today it’s social media. Regardless of the method, getting your business name out is essential to growing your client base.
Defining a solid strategy for advertising and setting an advertising budget is a significant step for any business.
When new stores launch, they often have a grand opening event involving media. The same is true for restaurants and many other businesses. This must all be considered at the beginning, especially if a significant startup even cost is involved.
Eight – Personnel
Unless the business is completely automated and on auto-pilot, personnel will likely be required. After all, it’s good old fashioned hard work that built American business. And it will continue to be the labor of people that make businesses succeed.
In the case of hiring staff in the state of New York, there will be certain legal considerations that must be taken into account.
- Staff hierarchy – Are management in place? Who runs the various business operations?
- Deductions & taxes – Accounts with the IRS setup? Software or accounting in place for payroll?
- Health care and benefits – Are your staff protected?
- Working conditions – Does the working environment comply with all state regulations?
Nine – Building Set up
Finally, and as you may have gleaned from the personnel section above – the last point on working conditions, we must determine the company location setup.
When starting a business, depending on the type of business and condition of the building, there may be significant expenses incurred to set things up accordingly.
In the case of restaurants, expenses to set up the business could stretch into the hundreds of thousands of dollars or more.
Knowing your finances is essential to have things start with success in mind. For more information regarding requirements for the building, take a look at the 2020 Building Code of New York State here.
6 New York State Government Entrepreneur Resources
- New York Department of State Office
- New York Department of Finance – Sales And Use Taxes
- The U.S. Small Business Administration – New York District Office
- New York Small Business Development Center
- New York Chamber of Commerce Directory
- New York City Trade Association Application
Check out my guide on how to start your business right with tons of useful tips I learned by successfully starting, building, and selling multiple companies.