How to start a small business in New York in 8 steps
Opening a small business is a smart way to generate income while doing what you love in New York. Residents of New York have found success in starting small businesses in many different industries. However, before they could open their doors, they had to follow a few key steps. If you’re looking to start your own business in New York, here is a step-by-step guide you can use to build a profitable and sustainable small business.
1) Think about the type of business you want to start
If you know that you’re ready to pursue your business idea, then it’s time to decide exactly what your business will look like. What type of business do you want to have? Will it be online, or do you want to open a storefront? Who is your target market, and what do you plan to sell? The more questions you can answer about your business, the more confident you will feel moving forward.
Next, research your competitors. What similar businesses already exist in your area? What are their strengths and weaknesses, and what can you learn from them? Let your findings help you develop your initial business idea, and keep your eye on your competitors throughout the life of your business.
2) Set up your legal structure
To operate a business in New York, you’ll need to register as a business entity under one of the following business structures.
- Sole proprietorship: This is perhaps the most straightforward business structure. A sole proprietorship allows you to receive all the profits from your business directly. However, it will not provide much in the way of liability protection. Your professional and personal assets will not be separate, which means they will be on the line should you fall into debt or get sued.
- General partnership: Like a sole proprietorship, a general partnership lets you share your business’s financial and managerial responsibilities with another person. You will both be held equally accountable should the business run into any financial trouble, but you will be able to reap the same benefits as a sole proprietorship.
- Limited Liability Company (LLC): An LLC is a popular way to form a business in New York. It’s a relatively simple structure that provides you with similar benefits to those found in sole proprietorships and general partnerships. However, your LLC will allow you to keep your personal and professional assets separate.
- Limited partnership: A limited partnership differs from an LLC in that you must have more than one person registered as an owner of the company. Under this model, partners do not share the financial and managerial responsibilities involved in running the business equally. Instead, one person takes on a larger share of responsibility, which comes with increased decision-making power. This is a great model if you have a fantastic business idea but need a partner who can take on a larger amount of financial risk to get it off the ground.
- Limited Liability Partnership (LLP): An LLP combines a limited partnership and a partnership. Each partner takes equal ownership of the business, and personal and professional assets remain separate.
- Corporation: Corporations are highly regulated business entities. They are considered wholly separate from their owners and shareholders. There are multiple types of corporations under which you can register your business in New York and receive your certificate of incorporation. Two common examples of corporations are S corporations and C corporations. These two types of corporate structures are similar. Still, the S corp comes with specific small business tax regulations that can provide additional benefits to small business owners in relation to a C corp.
- Nonprofit: Nonprofits are focused on supporting social causes and gain their income largely through donations. Except in rare cases, nonprofit organizations receive income tax exemption status in New York.
Each of these business structures comes with specific rules for registration and their own filing fees. Depending on which structure you choose, you can expect to develop documents such as an operating agreement, articles of organization, bylaws, annual reports, or articles of incorporation. For example, if you choose an S corporation, you must file IRS Form 2553—a document not required by some of the other types of business entities.
Once you choose your business structure, create a written business plan. Your business plan will help to focus you as you continue to build and grow your business. It will also act as supporting documentation if you wish to pursue small business loans from banks or financing from other lenders. Your business plan should outline your financial business needs, marketing strategy, operations plan, and overall mission and purpose as a business.
3) Name and register your business
You will use your business name throughout your business, both online and in-store. Select a business name that is simple to spell, pronounce, and remember. Your business name should also directly relate to the type of business you are.
The New York Secretary of State (SoS) also requires that your business name be original to register with the state. This means that you should avoid choosing a name that is already in use by another company. Check with the New York SoS to see if your business name is still available. Also, it’s a good idea to ensure that the matching website domain and social media handles are available before you officially select your business name.
Once you’ve decided on a name, complete a Name Reservation Request and register your business with the state. If you wish to operate as a sole proprietor and do not want to file for a “doing business as” (DBA) name, you must use your own legally given name as the name of your business.
Next, provide your business name and address to the state. You’ll also need to specify a registered agent. The registered agent is the person responsible for receiving legal paperwork on behalf of the organization.
4) Apply for licenses and permits
New York business owners must file for a business license to operate legally in the state of New York. Review the U.S. Small Business Administration (SBA) website to determine the specific licensing requirements you must fulfill. The requirements will differ depending on your chosen business structure. Upfront and annual registration costs are likely to be associated with your licenses and permits as well, so be sure to factor those numbers into your startup and annual cost predictions.
5) Choose a location
You may be surprised to see that choosing a business location is in the middle of this list rather than at the top. However, it’s only after you know what type of business you will open, develop your business plan, understand the zoning requirements of your business, and file the necessary legal documentation that you should find your perfect business location.
Perhaps you want a brick-and-mortar near the Empire State Building in New York City (NYC), or maybe you want a small shop in upstate New York. Wherever you choose to open your business, consider a space that balances budget and proximity to your target market. Partner with a Real Estate Agent to help you find the best location for your business.
If you seek to open an entirely online business registered in the state of New York, spend ample time researching various eCommerce platforms to find the best fit in terms of functionality and budget.
6) Open a bank account and prepare for future taxes
A business bank account helps you to track and show your business finances separate from your personal finances. It is essential for all types of business entities, even sole proprietors, as it makes business taxes much easier on you (and clearer for the IRS).
Next, consider opening a business credit card. Not only does a business credit card give you a way to separate your business and personal spending, but it also provides you with additional capital, should you need it.
Finally, register with the IRS and obtain your Employer Identification Number (EIN). Your EIN is essentially a social security number for your business and will be used to file your state and federal tax returns each year. Contact the New York Department of Taxation and Finance to learn more about handling sales tax, federal tax, state tax, or other business taxes.
7) Purchase business insurance
The right business insurance policies will ensure your small business is covered should certain potentially financially damaging situations occur. Any or all of the following business insurance policies may be required for you to operate a business in New York.
- Workers’ Compensation Insurance: Workers’ compensation insurance is required in the state of New York if you have even a single employee. It helps protect your business if an employee gets injured or sick while on the job.
- General Liability Insurance: This policy protects you against the financial loss associated with property damage or bodily injury.
- Business Interruption Insurance: Business interruption insurance helps recover financial losses associated with temporary and unforeseen business closure.
- Commercial Property Insurance: Commercial property insurance combines business property insurance and business personal property insurance. It covers both your brick-and-mortar as well as many of its contents should they become damaged for a covered reason.
- Business Owner’s Policy: A Business Owner’s Policy is a package of multiple policies such as business property insurance, general liability insurance, and business interruption insurance. You can also include additional policies specific to your type of business to ensure sufficiently comprehensive coverage.
8) Create a marketing plan, hire employees, and more
A solid marketing strategy saves you from marketing overwhelm—and overspend. Your strategy will give you the best chance to develop a relationship with your target market through consistent, clear communication across multiple channels such as social media, email, Google My Business, and your business website.
Even a small initial marketing effort requires a few key components. Your business website is likely to be your biggest asset as it allows you a platform to communicate who you are and what you offer. Even if you don’t allow for sales on your website, you can still inspire potential customers to contact you through clear marketing copy and a well-developed, mobile-friendly site.
In addition to your business website, you should have printed marketing assets such as business cards to network and grow your business through word-of-mouth. A presence on at least one social media platform will help spread the word about your business as well.
Beyond marketing, you’ll want to consider your employee needs. If you’ve decided to operate as a sole proprietor, you may not need an employee. However, if you intend to scale your business, you’ll likely need help over time. When it does come time to hire, look to the SBA for the proper hiring forms. You can also find information there about the state’s requirements for hiring employees in New York.
The road to a new business can be exhausting, but the payoff is well worth the effort. To keep you moving forward, check out some small business resources like New York's Small Business Development Center, the New York Department of State, and the New York Department of Taxation and Finance.
Congratulations on your new venture, and best of luck as you work to become a New York business owner!
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