A new york corporation formation can save your assets from liability for your business’s debts and obligations. It also helps protect you particularly if someone sues one of your business partners or employees. There may also be other benefits to incorporating your business, such as tax savings and enhanced appeal to investors.
Introduction to the new york corporation
Becoming a corporation can be confused. Many small business owners choose to engage a lawyer to get through the process. To incorporate, owners must:
- Enroll for the Incorporation Certificate with the Department of State.
- Formulate bylaws.
- Record taxes and other employee information.
- Ask an EIN Number from the Internal Revenue Service (IRS).
- Apply for business permissions and licenses.
- Submit and showcase your entity’s first report.
- Pay all incorporation fees.
Who Can form a Corporation in New York?
A Professional Service Corporation (PSC) may only be established by individuals who are in a profession that is licensed by the state of New York. A personal service corporation (PSC) is a particular taxpaying entity identified by the IRS. These professions involve:
All people should be above 18 and are professionals.
Every state has its personnel requirements for incorporating it. In New York, they cover the following:
- Age requirement: Directors must be at least 18 years of age.
- Several directors: One or more directors are permitted.
- Residency: There is no necessity that directors must live in New York.
- Officer positions: New York needs that every corporation has a president, a chief financial officer, and a secretary. All three areas can be held by one person, but only under certain circumstances.
Articles of Incorporation for new york corporation
In addition to personnel terms, your New York Articles of Incorporation must include the following.
You must select the Secretary of State as your registered agent for service of process of any contractual documents. You must also give the Secretary of State with a mailing address where your corporation can get legal documents served against it.
Unlike in most states, choosing your registered agent is voluntary in New York. Your registered agent receives significant tax, government, and legal documents for your corporation. The agent must be open during normal business hours. New York claims that you enter your agent’s name in your Articles of Incorporation. Your agent must have a real address in New York, not a post office box. We can support you to designate an agent when you incorporate it with us.
You must enter the following in your Articles of Incorporation in New York Corporation:
- The number of shares entitled to be issued.
- The par value of all share or class of shares and series, along with their designation. You can submit a statement that there is no par value rather.
- A statement explaining the authority vested in the board of directors to establish, designate, and make modifications within a series of shares, if any.
Types of New York Corporation for formations: C & S Corporation?
One of the key benefits of a C corporation is that it can have an infinite number of shareholders. Businesses that expect hundreds or thousands of shareholders will desire to form a C corporation. For example, publicly traded companies are normally C corporations.
C corporations may also decrease the cost of fringe advantages. They provide for employees, such as health and disability insurance. Stockholders in a C corporation are not expected to pay tax on the fringe advantages received, as long as 70 % of the corporation also gets the same advantages. It’s quite simple for a C corporation to raise capital because they’re able to circulate an unlimited number of shares across various classes of stock. Also, investors have limited liability for the activities of the business.
S corporations are entities that choose to pass corporate income, losses, credits, and deductions by their stockholders for federal tax schemes. The main major advantage of an S corporation is that it’s not permitted to have more than 100 stockholders. Shareholders in both S and C corporations are expected to pay personal income tax on the following transactions:
- Dividends paid
- Salary received
- Earnings distributed
Benefits of Incorporating in New York
If you’re a new business in New York, it’s likely that most, if not all, of your operations, are here, as are several of your clients. Logistically speaking, it’s more comfortable to incorporate where you live and run your business. For that purpose alone, many New York companies opt to incorporate in New York.
Except for convenience, New York incorporation gives businesses a lot of freedom to work as they see fit. Among other things, New York LLC law enables members to customize their business allocations, preserve their interests from creditors, and form LLCs of unlimited duration if they so desire. New York is also recognized for having favorable commercial contract laws, along with courts that are skilled at executing those laws.
Steps to form New York Corporation
1. Pick a Corporate Name
Your corporation’s name must add the word “Incorporation,” “Incorporated,” or “Limited,” or an abbreviation.
Your corporation’s name must be identified differently from the names of other business entities previously on file with the New York Secretary of State. Names may be reviewed for availability at the New York Department of State Division of Corporation’s business name database. You need to reserve and save your New York Corporation name
You may reserve a name for 60 days by enrolling an Application for “Reservation of Name”. This application is to make with the New York Department of State Division of Corporations. The application must be registered online.
2. File Certificate of Incorporation
Your corporation is legally formed by filing a Certificate of Incorporation with the New York Secretary of State (SOS). The certificate must cover:
- Corporation’s name
- The corporate mission
- The county in New York in that its main office is established
- The stock structure
- Designation of the SOS as the corporation’s agent for service of process
- The name and address of the person to whom the SOS must mail any process initiated.
The SOS has received an optional Certificate form that adds a general-purpose clause and allows the corporation to give 200 shares of common stock with no par value. If more shares and/or a par value are wanted, rewrite this part of the form to include the desired number of shares and a statement of their par value or that they are without par value.
The certificate may be registered online or by mail.
3. Appoint a Registered Agent
Every New York corporation must designate the New York Department of State as its registered agent for service of process in the state. The Department will receive and deliver legal papers on the corporation’s behalf if it is issued.
4. Prepare Corporate Bylaws
Bylaws are an in-house corporate document that fixes the basic ground rules for operating your corporation. They are not filed with the state. Your corporation is not lawfully needed to have corporate bylaws, but you must adopt them because they authorize your corporation’s operating rules. Also, help show banks, creditors, the IRS, and others that your corporation is genuine.
Keep your bylaws, meeting minutes, and other relevant corporate papers in a corporate records book. This can be a simplistic three-ring binder or corporate documents kit you order from a corporate kit supplier. Keep it at your corporation’s principal office.
5.Appoint Directors and Hold First Board Meeting
The incorporator the person who approved the articles must choose the initial corporate directors. That will further serve on the board till the leading annual meeting of shareholders. The incorporator must satisfy in an “Incorporator’s Statement” giving the names and addresses of the first directors. The incorporator must approve the statement and place a copy in the corporate records book. The statement must not be filed with the state.
You must continue your first meeting of the corporation’s board of directors in which the directors can elect corporate officers. Also, adopt bylaws, choose a corporate bank. Even, approve the issuance of shares of stock, set the corporation’s fiscal year, and choose an official stock certificate form and corporate seal. The directors’ actions must be recorded in corporate minutes made by the incorporator or any of the directors and supported by the board of directors. Additionally, if the corporation will be an S corporation, the directors must allow the election of S corporation status.
6. Issue Stock
Give stock to each shareholder in return for their capital contributions made of cash, property, services, or all three. Small corporations normally issue paper stock certificates. Start all shareholder’s name and contact information in the corporation’s stock transfer ledger.
New York corporations may give stock with a par value or no par value. The certificate of formation must designate that option is preferred. Par value is a set amount below that the stock cannot be sold. So, it has nothing to do with the stock’s actual value. Shares without par value may be allotted or sold at any price. This is indicated in the SOS certificate of incorporation form.
A share of stock in your corporation is listed as a security under state and federal securities laws that regulate the offer and sale of the corporate stock. But, federal law exempts “private offerings:” a non-advertised sale to a limited number of people (generally 35 or fewer).
New York needs anyone selling securities to the public to register as a broker-dealer with the Investor Protection Bureau of the New York Attorney General. However, it is commonly understood that this registration provision does not apply to a small corporation planning the unadvertised private offering and sale of its first shares that are exempt from federal registration.
7. File New York Biennial Statement
All corporations doing business in New York must register a Biennial Statement with the Department of State each other year. The statement is due when the calendar month in which the corporation’s original certificate of incorporation was registered. The statement is registered online.
8. Comply With Other Tax and Regulatory Requirements
Additional tax and regulatory provisions apply to your corporation. These include:
EIN: Your corporation must get a federal employer identification number (EIN). You may get an EIN by making an online application on the IRS website. There is no filing fee.
New York State Taxes: New York State Tax Law needs a corporation to register franchise tax reports and pay franchise taxes yearly even if the corporation does not carry a business or loses money. Franchise tax provisions begin the date the corporate existence starts and continue until the corporation is lawfully dissolved by the Secretary of State.
Business Licenses: Depending on the nature of your business, the State of New York may ask that you either get a license or permit. Contact the county clerk and the clerk of the city, town, or village in that the business will engage with questions regarding local licenses or permits.
8.Foreign Corporations Doing Business in New York
All corporations made outside of New York must file with the New York Secretary of State to do business in New York. Foreign corporations must select the New York Department of State as its registered agent for service of process in the state. The Department will allow and forward legal papers on the corporation’s account if sued. The application must be completed by an original certificate of good standing or existence, no longer than one year old, from the Secretary of State or similar official of the foreign corporation’s home state.
How Is a New York C Corporation Taxed?
Shareholders that have spent in a C corporation will be subject to double taxation because they will pay taxes as both a stockholder and as an individual. The principal advantage of an S corporation is the pass-by taxation that a shareholder receives. To be extra specific, the income made from the business is transferred onto the stockholder rather than being taxed at both the corporate and personal levels, like with a C corporation. In other words, S corporations in the country of New York will pay no federal income tax at the company level and are not exposed to double taxation. But, they must file Form CT-6 with the New York Tax Department.
Setting up a New York Corporation can give your company many advantages not available to sole proprietorship or partnerships. But, forming your new york corporation will require a bit of preparation and some help from an expert and adequate attorney. C Corporation and S corporation formation do contact us.