Checklist For Starting a Business in New York

I've been told that people love checklists.  Here is mine for Starting a Business in New York:

1. Choose Your Business Structure

In New York, the choices of business structure are basically sole proprietor, partnership, corporation or limited liability company.  The right choice should be tax friendly, limit your liability, and fit your future plans for your business.  For example, if you hope to attract venture capital or go public one day, a corporation may be the best choice.  Otherwise, more and more businesses are choosing to establish a limited liability company (LLC).  But beware: New York makes it costly to form LLCs, since it requires you to publish the formation of your LLC in two newspapers.  In New York City this costs around $1000 in addition to your other filing fees.

To really understand the different business structure options and their consequences for your particular situation is complicated stuff. I recommend that you discuss with your attorney or accountant what is best for you. 

Trap for the unwary:  If you are doing business with other people, you may be in a partnership without knowing it (see this post on the topic).  This means that your partner could enter into agreements and incurr debt in the name of the partnership and make you liable for it.

2. Choose a Name for your Business

First, follow New York’s laws regarding the name for your particular entity.

For example, if you formed a corporation, the name must end with "Incorporated" or "Inc.", "Corporation" or "Corp.," or "Limited" or "Ltd" (see Section 301 New York Business Corporation Law).  Also, the name of the corporation must be different from the name of any other corporation, limited liability company or limited partnership already in existence in New York.  You can find out whether your name is already in use here.

Also, New York forbids the use of certain terms in corporate names (or only allows them after approval).  For example, you cannot use “chamber of commerce”, “state police”, or “state trooper” in the name of your corporation.  For more forbidden or restricted names, look here.

Caution:  Even if your chosen name is acceptable under New York Business Corporation law, it may still violate somebody else’s right to the name based on state or federal trademark law.

Second, make sure your name is an available domain and set up a website with that name.  This is not  a legal requirement, but will help you to establish a web presence.

Third, consider protecting your name as a trademark or trade name under state or federal trademark laws.  For basic trademark questions, see this helpful FAQ.

Fourth, if you want your company to do business under a trade name or an assumed name, rather than its legal name, file a business certificate, also known as DBA (doing business as). Find out more about DBAs here.

3. Get a Tax Identification Number and Learn about your Tax Obligations

Get a tax identification number for your business by phone, fax, mail or online.  Learn how to here . Tip:  Even though you will be on hold  for a while in most cases, I find it much easier doing this on as opposed to doing it online.  For one reason or another, the online form has its problems.

If you are a one-member LLC and choose to be a “disregarded entity” for tax purposes, you do not need a tax id. Your social security number will be enough.

Get familiar with your tax obligations.  Recommended reading:

Publication 20, New York Tax Guide for New Businesses

Publication 583, Starting a Business and Keeping Records (IRS)

4. Open a Business Bank Account

Don't think that all banks are the same.  There are huge differences in customer care.  Get a referral for a banker who cares and offers your business real service.  To open a business account, the bank will most likely want to see your incorporation or other business entity formation documents.  In the case of a corporation, this would be a certified copy of your certificate of incorporation and in some cases also the filing receipt from the Department of State.

5. Get Licenses and Permits Necessary for your Business

Find out which ones here  and consult your Attorney.

6.    Document your Agreement with Fellow Business Owners

If you are going into business with other people, don’t neglect to document your agreement with them.  Depending on the entity you choose for your business, this would be  a partnership agreement (partnership), a shareholder agreement (corporation or s corporation) or an operating agreement (limited liability company).  For more information on the issues to agree on, see here.

7.    Purchase Insurance

Consider purchasing insurance such as:

Property insurance to cover loss of property due to fire and other perils.
Liability insurance to cover your liability to your customers and others.
Workers' compensation and disability insurance for your employees (coverage is required by law).
Business interruption insurance to cover business losses and expenses in case you are prevented from operating your business due to catastrophic events and other perils. 

8. Have Your Attorney Review Key Documents

Have your attorney review key contracts of your business such as commercial leases, contracts with vendors, contracts with customers, contracts concerning licensed technology, and other intellectual property crucial to your business.

If you need help on the topic of "Checklist For Starting a Business in New York", call a licensed small business attorney in your area.

Comments

[Steven]

Thanks for the blog. I might mention that there are additional words that are not mentioned on the words you can not use for the name of your business. I got rejected for using the word "cooperative"

[Joe C]

ty so much, very helpful