Sunday, January 23, 2022

How To Create An S Corp In New York

Forming A Corporation In New York

Start and Setup a Corporation on line in less than 6 minutes

Here is an outline of the steps you need to follow in order to form a corporation in New York. You should also read the general section on forming a corporation for information applicable in any state. Additionally, you should familiarize yourself with the New York Department of State’s website, which has useful information and resources.

1. Choose a business name for the corporation and check for availability.

  • New York law requires that a corporation name containthe word “Incorporated,””Corporation,” or “Limited,” or one of thefollowing abbreviations: “Inc.,””Corp.” or “Ltd.” Additionally, yourcorporation name must be distinguishable from the names of othercorporations, limited liability companies, and limited partnershipsalready on file with the Department of State. There are a large numberof words that cannot be included in the name without prior approval.For a full list, see N.Y. Bus. Corp. Laws § 301.

2. Recruit and/or appoint a director or directors for the corporation.

  • Under New York law, a corporation must have at least one director.
  • Directors must be at least eighteen years old.

3. Prepare and file a certificate of incorporation with the Department of State.

New York Business Facts And Environment

NY Business Facts

New York is known as The Empire State, due to its wealth and rich collection of resources. New York itself was named for the Duke of York in 1664.

The official bird of New York State is the bluebird, and its official flower is the rose.

New Yorks economy is the third largest in the country, with a gross state product of $1.44 trillion. It is outranked by California and Texas. If it were a country, it would rate as the 12th or 13th largest economy in the world.

New York City is one of the worlds largest center of finance, and is home to the New York Stock Exchange and NASDAQ. The greater Manhattan area is the USs leading center of banking, finance, media, and telecommunication.

With a population of an estimated 8.5 million, New York City has a reputation as a melting pot, and is one of the most diverse cities in the United States.

New York Business Statistics

New York State is home to 2.1 million small businesses, many of them being women-owned, making up 99% of the states business population. They employ 4.4 million employees, approximately 50% of New Yorks working population.;New York is home to more Fortune 500 companies than any other state.

Major Companies in New York

JPMorgan Chase, IBM, PepsiCo, Verizon, and Pfizer are among the largest companies in the state of New York.

New York Startup Environment

How Long Does It Take To Form An Llc

You can form an LLC within 24 hours. However, you normally have to wait a couple of days to receive the necessary documents in the mail to prove that your LLC has been formed. This may be necessary for opening a bank account. Again, if you form online, it will be much faster.

Some banks may require you to show an operating agreement before they will open an account for your LLC.

The publication requirement has to be completed within 120 days of formation. Notwithstanding, you can start doing business with your LLC as soon as it is born. If you fail to fulfill the publication requirement, your business loses the authority to conduct business in New York with the expiration of the 120 day period. This is not as bad as it sound, as explained here.

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Apply For Necessary Business Permits Or Licenses

Even after you file your Certificate of Incorporation, youll need to acquire the required licenses and permits to operate.

Unfortunately, theres no one-stop shop for these necessary items. Licenses vary by industry and location and could include federal, state, and local requirements. Luckily, the New York Business Express offers new business owners a;helpful tool;that creates a checklist of required New York forms, licenses, and permits tailored to their specific situations.

Check with the economic development offices at the county and city levels to learn about any permits or licenses that youre required to obtain through these local municipalities.

Two Ways To Register Your Business

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MyCorporation® can help you file all of the necessary documents toform your corporation in New York.

Our free guide provides you with all of the information you’ll need to form your corporation in New York. Bookmark this page as a reference so you can return easily as you complete each step of the process.

Our filing experts can get you up and running quickly and accurately, completing the required filings on your behalf.

+ state fees

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How Is An S Corp Different From A C Corp Or An Llc

Unlike traditionalC Corporations, also called C Corps, the S Corporation is not subject to corporate income taxes. Instead, the S Corporation receives different treatment for tax purposes that is generally more favorable to the business owner. The S Corp is a pass-through entity for tax purposes, similar to the LLC. This means that the income generated by an S Corporation will flow through to the personal income tax returns of the shareholders, and the S Corp itself generally does not owe any tax liability.

Structuring your business as an S Corp also gives you certain flexibility for managing the ownership of the company. The stock of S Corporations is freely transferable, while the interest of LLCs is not. This means that the shareholders of S Corporations can sell their ownership interest without obtaining the approval of the other shareholders.

Another area of concern for business owners is reducing their liability for self-employment taxes, and an S Corporation can have an advantage over an LLC in this area as well. To visualize how much an S Corporation can save you in taxes, check out ourS Corporation Tax Calculator.

Although the S Corporation offers significant tax advantages and ownership flexibility, it is not the right choice for every business. There are a few restrictions as well.

An S Corporation must adhere to the following limitations:

Directors And Meeting Requirements

The sixth step to start an S-Corp in New York is to meet the director and meeting requirements.;

S-Corp shareholders will elect a board of directors to represent their interests as the S-Corp develops. Directors can also elect officers wholl manage the S-Corps operations.

Shareholders must have meetings, and the S-Corp will track their minutes. Theres also a requirement for S-Corps to have annual meetings in New York State.;

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What Is An S Corporation

An S corporation is an incorporated business that is taxed as a pass-through entity. This means that S corps do not pay federal taxes on their business income. Instead, the business profits “pass-through” to the owners of the S corp, who are also known as shareholders. Then, the shareholders pay income tax and report their share of the profits in the form of salaries on their individual tax returns, which are then taxed.

In order to elect an S corporation status for tax purposes, corporations will need to file Form 2553 – Election by a Small Business Corporation. The form must be signed by all shareholders and must be filed within two months and 15 days after the start of the initial tax year.

To learn more, read our What is an S corporation guide.

Can An S Corp Own An S Corp

New York S-Corp! Does it make sense?

An S Corp cant own an S Corp.

Under the US tax code, owners of an S corp must be US citizens, legal residents, or estates. Some types of trust may own an S Corp as well.

No corporation of any kind can own an S Corporation. The only exception is through a qualified subchapter S subsidiary and only applies in some cases.

This technical term, abbreviated QSSS, just means that for an S Corporation to own another S corporation, it must own all the shares.

In other words, S Corp A who desires to own some of S Corp B must own 100% of it or 0% of it.

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What Are The Benefits Of A Corporation In New York

There are many benefits to forming a corporation in New York.

First, theres less risk for owners, as the corporate structure creates an entity entirely separate from the individuals forming the business. This provides owners more personal protection financially and legally.

The issuance of stock also makes it easier for corporations to raise capital and obtain funding. Its also easier for corporations to offer retirement plans and transfer ownership.;;

Specifically, there are;many advantages;to forming a corporation in New York, including tax incentives, financial support for small business owners, and professional development opportunities.;;

There are some disadvantages to incorporation, as well. C corporations can experience double taxation first on their profits as a corporation, and again when their shareholders are taxed on their dividends.

Keeping Corporate Records And Ongoing Filing Requirements

New York requires that corporations create records to maintain their corporate status, including bylaws and corporate meeting minutes. set forth your companys operating rules, the responsibilities of its directors, and the rights and powers of shareholders. They can also address other corporate matters. We can tell you whether and meeting minutes are required by each state. You don’t have to file your bylaws with the state, but you’ll need them to demonstrate to banks, lending institutions, creditors, the IRS and the courts that your corporation is valid and legitimate. Bylaws also help to establish rules so you can keep your corporate assets and debts separate from your personal ones.

Keeping minutes of your director and shareholder meetings is also mandated by New York. Your corporate minutes should be maintained at either your corporate office with your other company records, or with your designated agent. The minutes are a historical record of your corporations decisions, and they keep track of all votes on important business decisions. They also help secure your corporate status.

Best of luck with your New York corporation. We’ll give you easy access to all the legal documents and information you’ll need to get started.

This article contains general legal information and does not contain legal advice. Rocket Lawyer is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.

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What Is A Subchapter Or Small Business Corporation

The S corp is a change of the tax code that Congress enacted into law in 1958, primarily to give a competitive leg up to small businesses. Politicians on both sides of the aisle had concerns about the consolidation of too much power in the hands of large, multinational corporations; with big business, big labor, and big government controlling the reins of American industry among them, the fear was that there would no longer be any room for private enterprise. The creation of the S corp was an economic boon to small-business owners, who at the time paid much higher tax rates than Americans do today. In 1958, the top corporate tax rate was 52 percent, and the top individual tax rate was 91 percent. The IRS would tax dividends paid to a high-income shareholder at a rate of 96 percent, and even a shareholder with a median-family income would be subject to a tax rate of 60 percent. S corps got rid of the double taxation and crippling tax burden, providing an incentive for individuals to invest the savings directly into their own small and family businesses. The tradeoff for avoiding high taxation were some restrictions on how S corps could structure themselves. These restrictions are as follows:

  • S corps cannot have more than 100 shareholders.
  • An S corp must be a domestic business entity.
  • All shareholders must be either U.S. citizens or legal residents of the United States.
  • S corps can only offer one class of stock .

Choose Your New York Corporations Initial Directors

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You must appoint at least one director who, among other things, will oversee your New York corporation until the first shareholder meeting.

The directors of a corporation are in charge of the adoption, amendment, and repeal of the operational bylaws as well as the supervision, election, and removal of officers.

Later you will prepare an Incorporator Statement with complete names and addresses of each director and keep it in your corporate records book. For now, you only need at least one initial director to list on your Certificate of Incorporation NY.

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How Is An S Corporation Taxed

S Corporations are taxed as pass-through entities. This means there is no federal income tax at the corporate level and any profits are allocated to the owners and taxed at a personal level.

You do have to file Form 1120S for your annual tax return, but the business isnt required to pay business taxes.

The money that an S Corporation earns leaves the business in the form of owner salaries and dividends.

Bottom Line For S Corporations:

Pros:

An S corporation is cheaper to form than an LLC.

More people are familiar with the structure of an S corporation.

It may be possible to save money on self-employment taxes.

Cons:

S corporations put serious limitations on the number and kind of permitted shareholders.

S corporations do not allow for special allocations and are less flexible than LLCs.

S corporations put limits on loss deductions on the shareholder level.

S corporations require ongoing formalities to preserve their limited liability shield.

S corporation status is not recognized by New York City, thus the s corporation is subject to corporate level tax.

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Hold The First Meeting Of The Board Of Directors

The first meeting of the board of directors is an important time in the life cycle of a corporation. During this meeting, the initial directors of the business will adopt the corporate bylaws, set the fiscal year, and appoint corporate officers. It is also common to authorize the issuance of shares of stock to the founders of your company, usually in exchange for assets.

This meeting, and all future meetings of the board of directors, must be recorded in corporate minutes. Minutes are documents that detail what was discussed and any decisions the business makes during meetings. They are stored with the corporate records.

Corporate minutes are required for all New York corporations by law. Falling behind on keeping and maintain minutes can jeopardize the corporation’s liability protection and overall tax advantages. It is important to maintain updated corporate minutes and keep copies of all the signed and approved minutes or actions by unanimous consent from any special or annual meetings of the corporation’s shareholders and directors.

Cost To Incorporate In New York

New York LLC – How to Start an LLC in New York

At BizFilings, we clearly outline our fees and the state fees to form a New York corporation. View our pricing to incorporate as a C corporation or S corporation;to plainly see:

  • BizFilings package prices.BizFilings offers three incorporation service packages from which you can choose.
  • State fee for standard turn-around.Our pricing clearly shows the state fee to incorporate in New York with standard turn-around.
  • Expedited turn-around.You will see the BizFilings and state fee, if any, for expedited turn-around.
  • Certified copy.Our pricing also clearly displays the BizFilings and state fee, if any, for issuing a Certified Copy of the Articles of Incorporation.

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Who Qualifies To Make The New York S Election

To qualify for New York S corporation treatment, your corporation must:

  • Be a federal S corporation.
  • Be a general business corporation taxable under Article 9-A or be the parent of a QSSS that is taxable under Article 9-A of the New York State Tax Law. Insurance corporations taxable under Article 33 or any corporation taxable under Article 9 can’t elect to be a New York S corporation.
  • Get consent to the New York S election from all of the corporation’s shareholders.

can’t make the New York S election. Only the parent corporation of the QSSS can do so.)

New York Corporate Name

The name must contain the word “Corporation,” “Incorporated,” “Limited” or an abbreviation thereof. All abbreviations must end with a period. Accent marks cannot be used in the name. The name may not be the same as or so similar or confusing to that of any domestic or authorized foreign corporation or reserved name. The name may not contain any word or phrase indicating the corporation is formed for any purpose other than that included in its Certificate of Incorporation. The use of certain enumerated words and abbreviations pertaining to banking, insurance and various professions is prohibited or restricted.

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Open A Bank Account For Your New York Corporation

There are two critical reasons to open a unique corporate bank account.

The first is that separating your personal assets from your business assets adds another layer of protection in the event that your business is sued.

The second is that syncing a single account with business accounting software will make managing your finances much easier.

Read our Best Banks for Startups and Entrepreneurs review to find the best bank for your business.

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