How to Form an S Corporation in New York

Introduction

Whether you’re starting a business or expanding an existing one, you’ll need to form an S corporation in New York. This legal structure is popular because it allows owners to be treated as a sole proprietor or partnership on the state level while enjoying the benefits of a corporation on the federal level. There are many steps involved in forming an S corporation in New York, so this guide will walk you through each one.

Decide on a Business

Your first step to becoming a business owner is deciding what kind of business you want to start. While the United States government recognizes five different types of businesses (sole proprietorship, partnership, corporation, limited liability company [LLC] and nonprofit organization), New York State only recognizes four: sole proprietorship, partnership, corporation and LLC.

Each type comes with its own rules and regulations that you must follow depending on what your business makes money from. If you’re starting a sole proprietorship or partnership with one other person or less than three people total—meaning there are no shareholders other than yourself—you’ll need to file documents with the state that show who owns the company and how much money they put into it as capital stock (the value of one share). This can be done at any time during the year while paying sales tax on everything sold after becoming active in New York State’s taxing district.

Choose A Name

Choosing a name for your S corporation is an important step in the formation process. Your business’s name must be distinguishable from other businesses and should not include any words that are obscene, scandalous or offensive.

You can choose whatever name you want for your S Corp; however, it must end with “Incorporated” or “Inc.,” followed by either “Corporation,” “Company,” “Ltd.” or “Limited.”

If you plan to operate out of New York City, your business name will also have to comply with federal rules that restrict certain words from being used in commercial advertising.

Create articles of incorporation.

The process for forming an S corporation in New York starts with creating articles of incorporation.

These documents are filed with the state and document your business’s formation. Once you have created them, they must be signed by all directors and shareholders (if any). The articles should include:

• The corporate name and address
• The number of shares issued to each shareholder (if any)

File the Article of Incorporation

To form an S corporation in New York, you need to file articles of incorporation with the New York Department of State. The filing fee is $100 and can be paid online using a credit card or mailed with a check. When filing for your own personal business, you may be able to file for free if you’re using a form that does not require legal counsel or an attorney’s signature.

The form should contain:

• A copy of the articles of incorporation
• Signature lines for officers and directors (excluding yourself)

Draft a Corporate Bylaw

A bylaw is a document that contains rules and regulations that govern the internal operations of a corporation. The bylaws should be drafted by you, the shareholder/owner, and then approved by your fellow shareholders/owners at an annual meeting (or special meeting). Your corporate bylaws will then be filed in New York State with the Secretary of State’s office.

Organize a First Board of Directors Meeting

The first step in forming an S corporation is to have a meeting of the board of directors. You must also have at least one director who lives in New York. The board’s main functions are to select officers for your corporation and make major business decisions, such as hiring or firing employees.

The next step is recording these minutes in your corporate record book, which should also include resolutions passed at this first meeting. These records must be kept by you for at least three years after dissolution or sale of your company.

Get an Employee Identification Number

If you’re the only owner of your business, you must apply for an EIN yourself. This identification number is used to file taxes and pay employment taxes, so it’s important to get one as soon as possible. You can apply for an EIN online or over the phone by calling 1-800-829-4933.

If you don’t have a social security number (SSN), please read these instructions carefully:

• Go to the IRS website at www.irs.gov and click on “Apply Now” under the Employer Identification Number section on their home page
• Select “Individuals & Sole Proprietors” in step 1
• Select “Other Filers” in step 2

Draft and Sign Consent Forms

The corporation is not required to have an election of directors in its bylaws, but it is a good idea because it helps establish the authority of your company’s board members. If you do decide to include an election process in your bylaws, be sure to include provisions for extraordinary actions that can be taken by the board instead of calling a shareholders’ meeting.

Consent forms are used to document the board’s approval of the articles of incorporation and bylaws and authorize them to take certain actions on behalf of the corporation. They are also used as proof that all directors were given information about changes made before they took place.

Set up a Bank Account

• Open a business bank account. As an S corporation, your business will function as a separate entity and its funds must be kept separate from any personal checking accounts. The easiest way to do this is by opening an account at your local bank with the name of your business on the sign above the door.
• Apply for insurance coverage. When it comes time to file taxes, any money that was made during a given year needs to be accounted for somehow—and the IRS is not going away anytime soon! For this reason, even though there aren’t any federal regulations requiring companies who make under $500k per year pay taxes (or even file taxes), it’s important that any company doing business in New York state does so.

Conclusion

By following the steps in this guide, you’ll be well on your way to starting an S corporation in New York.