Ready to turn your dream into a business in New York? Our guide breaks down the journey into easy steps, from idea to setting up the business, helping make the process a little less overwhelming.

Steps To Start A Business In New York

Step 1: Choose a Business Idea

The first thing you need to do when starting a business in New York is, of course, to figure out what your business will offer. You might already have an idea, or you might still be thinking about it. Either way, we have a collection of business ideas for you to look through. Here, we have details on over 300 different industries, how much it might cost to get started, advice, and plenty more to help you out.

Step 2: Write a Business Plan

After locking down the business idea, your next step should be to get a business plan in place before taking the plunge. A business plan will help you identify your goals, better understand the market and competition, and develop strategies for success.

Many people only consider writing a business plan because the bank asks for one in order to get funding. While that’s a valid reason, perhaps most importantly, writing a business plan gets the ideas out of the entrepreneur’s head and helps create a roadmap for where they want the business to go. Just as most builders wouldn’t build a house without blueprints, an entrepreneur shouldn’t build a business without a business plan.

Related: How to write a business plan

Step 3: Find the Money

Obtaining the money needed to start a business is often at the top of people’s problems when starting a business. It’s important to secure the funds needed early, as the other steps aren’t worth doing unless you can access the cash.

The first source is using personal funds. This can be a great way to get started, as it requires no debt, and you don’t have to worry about interest payments or other loan obligations. However, this option may not be feasible for larger businesses that require more capital than the owner has access to. If that’s the case, we have to look at outside funding sources.

The first outside source is conventional bank loans. These are typically the most common type of financing for small businesses, as they offer competitive rates and terms. However, banks typically require a personal investment of between 15% and 25%, collateral, and a strong credit score in order to qualify for a loan.

Next, we have SBA loan guarantees. The Small Business Administration (SBA) offers loan guarantees of up to 85% of the loan amount, which can help reduce the bank’s risk.

The next option is microloan programs. These are smaller loans for startups and small businesses that need quick access to capital but may not qualify for traditional bank financing. In New York, there are several microloan programs, such as those offered by Pursuit (formerly the New York Business Development Corporation) and the Excelsior Growth Fund.

Finally, investors can also be an option if you’re looking for large amounts of capital quickly without taking on debt. Investors can provide both cash investments and mentorship that can help your business grow faster than it would without their support.

But, what about small business grants? Unfortunately, while you may see information for free money to start a business, it’s rare for startups. Here is some more information about small business grants to learn more, but if you come across someone requiring money for this information, it’s usually a scam.

Related: Understanding the different types of business funding

Step 4: Select a Business Structure

The next step to starting a business in New York is selecting a business structure. A business structure (also called a business entity) refers to how a business is legally set up to operate, and defines how it is organized, managed, and taxed. Each business entity has different implications, such as personal liability, tax obligations, and overall operational flexibility. In New York, the four most common types of business entities are sole proprietorship, general partnership, corporation, and Limited Liability Company (LLC).

A sole proprietorship is the simplest form of business entity in which one person owns all assets and liabilities of the business. This type of entity offers easy setup and minimal paperwork but does not provide any liability protection for its owner.

Related: How to start a New York sole proprietorship

A general partnership is similar to a sole proprietorship except that two or more people own it. Each partner has equal control over the management of the company and shares profits equally. However, like a sole proprietorship, each partner is liable for legal issues and debts incurred by the partnership.

A corporation is a separate legal entity from its owners (called shareholders), offering limited liability protection. The pros of a corporation include separating the assets of the business and owners, so their personal assets are protected, along with potential tax benefits. However, the cons include a more complex setup, higher costs, and potential double taxation where profits are taxed at the corporate level, and dividends are taxed again at the individual shareholder level.

Related: How to form a New York corporation

A Limited Liability Company (LLC) is a hybrid structure that combines the limited liability protection of a corporation with the ease of administration of a sole proprietorship or partnership. Pros include limited liability for members (owners) and flexibility in management. The cons involve more administrative requirements and a more expensive setup and annual reporting cost compared to a sole proprietorship or general partnership.

Related: How to form a New York LLC

Step 5: Register the Business

After setting up the business structure, the next step is to register the business. Keep in mind that requirements may vary depending on your business type and location, so be sure to verify your specific needs with the relevant state and local agencies. Here are some of the fundamental registrations to look out for.

• Business licenses: The state of New York doesn’t have a general business license, but your business may need licenses or permits from the city or county in which it operates. Examples include a city business license, building permits, zoning permits, and signage permits. Contact your local government office or visit their website to identify local requirements.
• Employer Identification Number (EIN): An EIN is a unique identification number assigned by the Internal Revenue Service to a business for tax purposes. Corporations, LLCs, and partnerships typically require an EIN, as do sole proprietorships with employees. You can obtain an EIN for free by applying online with the IRS.
• Sales Tax Certificate of Authority: If your business sells taxable goods or services in New York, you’ll need to register for a Sales Tax Certificate of Authority. This can be done online through the New York State Department of Taxation and Finance’s website. After registering, you’ll be responsible for collecting and remitting sales tax to the state.
• Business name registration: If you plan to operate your business under a name other than your legal name (for sole proprietorships and general partnerships), an Assumed Name (sometimes referred to as a Doing Business As or DBA) will need to be filed with the County Clerk’s office where the business will be located. The name must be unique, and a search will be done at the County Clerk’s office. Corporations and LLCs register a business name at the time of formation, however, they can register a DBA with the New York Department of State.
• Professional licensing: Some professions, such as cosmetologists, barbers, athletic trainers, and home inspectors, require occupational licensing in New York before offering their services.

Related: What business licenses and permits are needed in New York?

Step 6: Open a Business Bank Account

With the business set up and legal, it’s time to set up a business bank account. Keeping separate personal and business banking accounts for your business and personal finances allows for more straightforward bookkeeping, making it easier to track income, expenses, and cash flow. This account will also simplify tax preparation to stay on top of federal, state, and local taxes.

Step 7: Hire Employees

If you plan to hire employees, there are multiple agencies a new employer will need to register with and labor laws to understand.

First, you will need to register for an Employer Identification Number with the Internal Revenue Service (IRS), the New York Department of Labor, and the New York Department of Taxation and Finance. Employers will also need to file a new hire report with the New York State Department of Taxation and Finance a hew hiring report for each new employee hired.

Related: Steps to hiring your first employee in New York

Step 8: Obtain Business Insurance

Insurance plays an important role in protecting small businesses from unexpected financial losses, legal disputes, and other potential risks. As a small business owner in New York, understanding the types of insurance policies available and their importance is essential to safeguarding your investment and ensuring business continuity. Every business will have different needs, but here is an overview of common insurance policies to consider.

• General liability insurance: This policy protects your business from claims arising from third-party bodily injuries, property damage, and personal or advertising injuries.
• Property insurance: If your business owns or leases a physical location, property insurance protects your business assets, such as buildings, equipment, inventory, and furnishings from losses resulting from events like fires, theft, vandalism, and certain weather-related damages.
• Workers’ compensation insurance: In New York, all employers are required to carry workers’ compensation insurance, which covers medical expenses and lost wages for employees who suffer work-related injuries or illnesses. This policy also protects employers from potential lawsuits filed by injured workers.
• Commercial auto insurance: If your business owns or uses vehicles for work purposes, commercial auto insurance covers property damage, bodily injury, and liability claims that may arise from accidents involving company-owned or leased vehicles.
• Professional liability insurance: Also known as errors and omissions (E&O) insurance, professional liability insurance is for businesses that provide services or professional advice and covers claims arising from errors, negligence, or omissions in the services provided by your business.

Related: Types of insurance your business may need

Step 9: Track Income and Expenses

Setting up an accounting system for your business is the next step in starting a business. By recording, organizing, and maintaining financial transactions and records, you will be able to better make informed decisions, track expenses, measure profitability, and ensure compliance with tax laws.

Organizing financial records can be done in a variety of ways. One option is to establish a paper filing system or spreadsheet where all financial documents are stored. Another option is to use accounting software such as QuickBooks, Xero, or Wave Accounting, which can help streamline the bookkeeping process. Finally, businesses may choose to outsource their bookkeeping needs by hiring an accountant or bookkeeper who can manage the process on their behalf.

Related: Setting up accounting for a business

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Common questions when starting a business in New York

New York Small Business Resources

There are 2.2 million small businesses in New York, which is 99.8% of all businesses in the state,¹ and 47.1% of New York employees work for a small business.² Because of the economic impact of small businesses, there are a number of small business resources to help New York businesses start and grow. Some of these include:

• Empire State Development: ESD offers assistance to businesses planning to expand or relocate within the state with assistance accessing state and local economic development resources.
• Entrepreneurship Assistance Centers: Provides instruction, training, and technical assistance to new and very small businesses across New York State.
• New York Business Express: This online resource helps with launching, operating, and expanding their business within the state.
• New York State Division of Minority and Women Business Development: A part of Empire State Development, the DMWDB helps minority and women-owned business enterprises grow and succeed in New York.
• Small Business Development Centers: The SBDC offers individual business counseling, access to a research network library, and a variety of workshops, seminars, and online classes.

Sources

1. Small Business Administration ↩︎
2. Census Bureau ↩︎