New York S Corporation Formation
How it Works
Biana Borukhovich, Esq
New York S Corporation Formation
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Why use UpCounsel to form an S Corporation in New York
Starting an S Corporation in New York with a business startup attorney on UpCounsel is easy, informative, and cost-effective. In just three simple steps, our S Corporation attorneys will help you protect your business and personal assets, and help you organize your business for state and federal compliance for S Corporation.
When forming an S Corporation in New York with UpCounsel, the attorney you choose to help you will conduct a business name search for your New York S Corporation and assist you in preparing your S Corporation Operating Agreement, along with providing other legal services based on your needs. Once your Certificate of Incorporation have been prepared and successfully filed with the New York Secretary of State, your New York S Corporation has been formed and begins its existence as a corporate entity.
However, a corporation does not register as an S Corporation with the Secretary of State. It registers as a corporation with the state and then may file for S Corporation status with the IRS. S Corporation status is a taxation category which provides income tax advantages to small businesses.
Requirements for Forming a New York S Corporation
Choosing a Company Name for Your S Corporation
One of the first steps in the process of forming your New York S Corporation is to choose your business name.
The business name that you choose must contain the words "Incorporated" or "Inc."
It must be distinguishable (not the same as or deceptively similar to) the name of any New York S Corporation or foreign S Corporation reserved or registered and cannot contain the words "bank", "trust", "trustee,""incorporated", "inc.", corporation", or "corp.", or "insurer" or "insurance company" or any other words suggesting that it is in the business of issuing policies of insurance and assuming insurance risks.
Your S Corporation name may contain the name of one or more members.
By using UpCounsel, you can choose several business names in order of preference. Your attorney of choice can then conduct a name check for your New York S Corporation before filing to see which names are available. Once you have chosen an available name, your chosen S Corporation attorney can help you properly register your name with the State of New York.
Certificate of Incorporation: When forming an S Corporation in New York, the Certificate of Incorporation must be filed with the New York Department of State Division of Corporations. New York state law requires that certain information be included in your Certificate of Incorporation when forming your New York S Corporation.
This information must include:
- The S Corporation name.
- The County in New York where the S Corporation will be located.
- The S Corporation must designate the New York Secretary of State as its agent for service of process. An address must be provided so that the Secretary of State may mail a copy of any process received.
- The organizer's signature.
- Name and address of the filer of the Certificate of Incorporation.
Publication: According to Section 206 of the Limited Liability Company Law, you are required to publish a copy of the Certificate of Incorporation after it has been filed, or a notice that acknowledges the formation of an S Corporation. This must be published in two newspapers designated by the county clerk of the county in which the S Corporation office is located for six consecutive weeks.
S Corporation Qualification Requirements: New York does not automatically treat your company as a New York S Corporation unless you are mandated to file as an S corporation under Tax Law section 660(i). A corporation will be deemed to have made that election under Tax Law section 660(i) if the corporation's investment income is more than 50% of its federal gross income of that year. This provision only applies to S Corporations taxable under Article 9-A.
If you are not mandated under Tax Law section 660(i), in order for a corporation to qualify as a S Corporation for tax purposes, it must meet the following requirements:
- Be a federal S corporation.
- Be a general business corporation taxable under Article 9-A or a banking corporation taxable under Article 32 of the New York State Tax Law. Insurance corporations taxable under Article 22 or any corporation taxable under Article 9 can't elect to be a New York S corporation.
- Get consent to the New York election from all the corporation's shareholders.
Additionally, a New York S Corporation formation generally requires inclusion and/or consideration of the following:
Organizers: One or more people may form a S-Corp, yet they do not need to be members of the S Corporation.
Minimum Number of S Corporation Organizers: One (or more).
Eligibility: An organizer may be an individual, partnership, limited partnership, trust, estate, association, corporation, S-Corp, or other entity, whether domestic or foreign.
S Corporation Operating Agreement: Every S Corporation with more than one member is required to have an S Corporation Operating Agreement. The Certificate of Incorporation may contain restrictions or prohibitions on the power of the members to adopt, amend, or repeal an operating agreement. If there is more than one member, any operating agreement shall initially be agreed to, in writing, by all of the members and must be entered into within 90 days of filing the Certificate of Incorporation.
Membership: A S Corporation must have one or more members.
Eligibility Requirements: A natural person or an entity.
Procedure for Membership: The member may acquire an interest in the S Corporation directly from the S Corporation at the time of formation and, after formation, at the time provided in and upon compliance with the Certificate of Incorporation or the operating agreement or, if not provided, only upon the vote of a majority in interest of the S Corporation members, excluding the vote of the person acquiring the membership interest, and only when the person becomes a party to the S-Corp's operating agreement.
Resident Agent needed for a New York S Corporation
Remember that the registered agent for your New York S Corporation must be the New York Department of State. Every New York S Corporation must have a registered agent in New York, which is the person or office designated to receive official state correspondence and notice if the company is "served" with a lawsuit. The registered office may be a place of its business.
New York Secretary of State
Once you create an S Corporation in New York, the New York Secretary of State will require that certain recurring responsibilities and duties be fulfilled. The most important of these are explained below.
For further information, contact the New York Secretary of State.
Recurring Responsibilities and Duties for New York S Corporations
Annual Report: Each S Corporation shall provide an annual report to the New York Secretary of State regarding its financial condition to each of its members.
Records: Each New York S Corporation must keep the following records open to inspection at its office:
- A current list of the full name and last known business or residence address of each member and of each holder of an economic interest in the S Corporation set forth in alphabetical order, together with the contribution and the share in profits and losses of each member and holder of an economic interest.
- If the S Corporation is manager-managed, you will need a current list including the full name and business or residence address of each manager.
- A copy of the Certificate of Incorporation and all amendments thereto, together with any powers of attorney pursuant to which the Certificate of Incorporation or any amendments thereto were executed.
- Copies of the S-Corp's federal, state, and local income tax or information returns and reports, if any, for the six most recent taxable years.
- A copy of the S-Corp's Operating Agreement, if in writing, and any amendments thereto, together with any powers of attorney pursuant to which any written operating agreement or any amendments thereto were executed.
- Copies of the S-Corp's financial statements, if any, for the six most recent fiscal years.
- The books and records of internal affairs as they relate to the S Corporation for at least the current and past four fiscal years.
Filing Fees for a New York S Corporation
The processing fee for the Certificate of Incorporation is generally about $200 and the filing and submission of the Certificate of Publication is about $50. These fees can change so it would be best to check with the New York Department of State on what the latest fees are. You may pay these fees in many different forms including cash, check, money orders, or debit and credit cards. .
Taxes for a New York S Corporation
A New York S Corporation is a special type of corporation created through an IRS tax election. An eligible corporation can avoid double taxation (once to the corporation and again to the shareholders) by a corporation with a Subchapter S designation by the IRS. A corporation must file a Form 2553 to elect """S""" status within two months and 15 days after the beginning of the tax year.
Owners of the S Corporation report business losses or profits on their personal tax returns, and therefore the business itself is not taxed. Each shareholder is responsible for paying taxes on their pro rata share of the S corporation"""s items of income, deductions, and credits.
New York state law follows federal law for income tax purposes. Therefore if a corporation is classified as an association taxable as a S Corporation for federal income tax purposes, so will it be taxable as a corporation for state tax purposes.
Federal Income Tax: An S Corporation does not pay federal income tax.
New York State Income Tax: A New York S Corporation must file a New Yor Form CT-6, the Election by a Federal S Corporation to be Treated As a New York S Corporation. Under New York law, the S Corporation is subject to pay a fixed dollar minimum tax based on New York receipts.
Federal Tax Identification Number: Your corporation will need to obtain a federal tax identification number, which is also known as an Employment Identification Number (EIN). You do not need to get a new EIN after the corporation choose to become a S Corporation. An EIN is similar to an individual's social security number. You will need an EIN for your S Corporation as long as there is one member, even if the S Corporation does not have employees. For certain tax filing requirements the attorney you choose on UpCounsel can help prepare your Federal Tax ID Application, if you have not done so already.
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