Legal Checklist Before Starting a Business in New York
Starting a business can begin with something pretty simple. Maybe you have been doing a service on the side, found a product people actually want, or finally decided that it is time to stop working for someone else. Then the paperwork starts.
Business structure. Taxes. Licenses. Contracts. Insurance. Employees. Suddenly, there is a lot more to think about than simply opening the doors.
If you are planning to start a business in New York, handling the legal side early can save you from expensive problems later. New York requires businesses to work with both state and local governments, depending on the type of business and where it operates.
Choose the Right Business Structure
One of the first decisions is deciding what kind of business you are creating.
New York recognizes several business structures, including:
- Sole proprietorships
- General partnerships
- Limited liability companies (LLCs)
- Business corporations
- Limited partnerships
Each structure can affect taxes, personal liability, ownership, management, and the paperwork you need to maintain.
For example, someone running a small business alone may consider a sole proprietorship or LLC, while people starting a larger venture with multiple owners may consider an LLC, partnership, or corporation.
There isn’t one structure that is automatically best for everyone.
Register Your Business
Once you choose your structure, make sure the required formation documents are filed with the New York Department of State.
For example, a corporation is generally formed by filing a Certificate of Incorporation. Other business structures have their own formation requirements.
If you already operate a company in another state and want to conduct business in New York, you may also need to qualify the company to do business in New York rather than simply assuming your existing registration covers you.
Check Your Business Name
Before investing money in signs, packaging, advertising, or a website, check whether your proposed business name is available and whether someone else already has rights that could create a problem.
If you plan to operate under a name different from your legal business name, you may need to register an assumed name, commonly called a DBA. New York provides separate filing procedures for assumed names depending on the type of business entity.
This is one of those things that is much easier to deal with before you build your entire brand around a name.
Get an EIN
Your business may need a federal Employer Identification Number, commonly called an EIN.
An EIN can be used for things such as filing taxes, opening a business bank account, applying for loans, and meeting certain business requirements.
Even when you’re starting small, keeping your business identity and personal finances separate can make bookkeeping and tax matters much easier.
Understand New York Taxes
Taxes are another area where waiting until the first bill arrives is not a great strategy.
Depending on your business, you may have obligations involving:
- Sales tax
- Corporation tax
- Withholding tax
- Business income taxes
- Other state or local taxes
New York’s Department of Taxation and Finance provides separate requirements depending on the type of business and what it sells or does.
If you sell taxable goods or services, you may need a New York Certificate of Authority before making taxable sales. New York generally requires businesses that need to collect sales tax to apply before beginning the activity that requires collection.
Don’t assume that every service is taxable, either. Whether you need to register can depend on exactly what your business sells.
Check Licenses and Permits
Not every business needs the same licenses.
A restaurant, construction company, salon, childcare business, contractor, professional practice, and online consulting company can have very different requirements.
New York recommends using Business Express to identify licenses, permits, and registrations that may apply to your particular business. Local governments may have additional requirements as well.
Before signing a lease or spending money on equipment, check these requirements.
Finding out that your location or business activity requires an approval you didn’t plan for can cause unnecessary delays.
Look at Local Rules
New York State requirements are only part of the picture.
Your city, town, village, or county may have additional rules involving zoning, signage, building use, occupancy, local licenses, or other business activities.
This becomes especially important if you are opening a physical location.
A space that looks perfect for your business isn’t necessarily legally approved for the type of business you want to operate there.
Get the Right Insurance
Insurance isn’t just about protecting your equipment.
Depending on the business and whether you have employees, you may need coverage involving workers’ compensation, disability benefits, Paid Family Leave, unemployment insurance, or other forms of business insurance. New York specifically identifies several insurance obligations that may apply to employers.
If you’re hiring your first employee, don’t wait until payday to figure this out.
Employer responsibilities can begin as soon as you start employing people.
Prepare Employee Documents
If you plan to hire workers, have your employment paperwork and workplace policies ready before the first employee starts.
Think about:
- Pay rates
- Work schedules
- Job responsibilities
- Paid leave
- Confidentiality
- Workplace conduct
- Remote-work arrangements
- Employee classification
- Payroll and tax reporting
New York has specific requirements concerning wages, employee protections, and employer reporting.
Getting these details organized early can prevent confusion between you and your employees later.
Put Agreements in Writing
Handshake deals can feel comfortable when you’re starting out.
They can also become uncomfortable very quickly when money is involved.
If you’re working with a business partner, contractor, supplier, landlord, investor, or major customer, consider putting important terms in writing.
Depending on the situation, agreements may address:
- Payment terms
- Ownership
- Responsibilities
- Deadlines
- Confidential information
- Intellectual property
- Ending the relationship
- Dispute resolution
A written agreement doesn’t guarantee that a dispute will never happen. It does give everyone something concrete to refer back to when memories start becoming different.
Protect Your Business Name and Intellectual Property
Your business name isn’t necessarily protected simply because you registered an entity.
You may also need to think about trademarks, logos, website content, product designs, photographs, written material, software, and other intellectual property.
If your business will depend heavily on a brand name, it can be worth checking for existing trademark conflicts before spending heavily on branding.
Keep Business and Personal Money Separate
Once the business starts receiving money, open an appropriate business bank account and keep good financial records.
Don’t casually mix personal purchases with business expenses and assume you’ll sort everything out later.
Good records can make tax filing easier and can also help demonstrate that the business is being operated separately from your personal finances, depending on the business structure.
Review Contracts Before Signing Them
A commercial lease can be one of the biggest commitments a new business owner makes.
Before signing, look carefully at rent increases, security deposits, repairs, insurance requirements, renewal options, personal guarantees, permitted use, and how the lease can be terminated.
The same principle applies to equipment leases, vendor agreements, franchise agreements, and other long-term contracts.
Something that looks like a small clause today can become expensive later.
Create a Legal Checklist Before Opening
Before you officially open, make sure you have reviewed:
- Business structure
- Business name
- Entity registration
- EIN
- DBA or assumed name requirements
- State and local licenses
- Permits
- Sales tax registration
- Business insurance
- Employee requirements
- Contracts
- Commercial lease
- Intellectual property
- Business banking
- Tax and recordkeeping requirements
New York’s official business resources are designed to help business owners work through registration, licensing, taxes, insurance, and other requirements.
Frequently Asked Questions (FAQs)
Do I need an LLC to start a business in New York?
No. New York allows several business structures, including sole proprietorships, partnerships, corporations, and LLCs. The right choice depends on factors such as liability, taxation, ownership, and how you plan to operate the business.
Do I need a lawyer to start a business in New York?
Not every business owner is legally required to hire a lawyer. However, legal advice can be valuable when you’re choosing a business structure, preparing an operating agreement, negotiating a commercial lease, bringing in partners, dealing with intellectual property, or entering significant contracts. The New York Department of State itself recommends consulting legal and financial advisors when choosing and forming a business structure.
Does every New York business need a license?
No. Licensing requirements depend on the type of business and its location. New York recommends checking Business Express and local government requirements to determine which licenses and permits apply.
Do I need to collect sales tax?
It depends on what you sell. Businesses making taxable sales of tangible personal property or taxable services generally need to register with the New York Tax Department and obtain a Certificate of Authority before conducting those taxable activities.
Final Thoughts
Starting a business in New York is exciting, but the legal checklist shouldn’t be something you deal with after you’ve already opened.
Take care of the basic structure first. Check your licenses. Understand your taxes. Get the right insurance. Put important agreements in writing. And if you’re entering a complicated partnership, signing a major lease, hiring employees, or putting significant money into the business, getting professional legal advice before signing anything can be money well spent.
You don’t need to know every New York business law before opening your doors.
You just want to make sure the important ones aren’t being discovered after a problem has already started.
