Taxes and License Fees in New York

Last updated on: July 14, 2021

Registering your LLC with the state and maintaining it requires some expenses. Paying taxes or obtaining licenses is an integral part of conducting business. In this article we will cover all issues associated with startup costs.

Some of your regular expenses will be related to taxes. Your NY LLC will have to pay various taxes, both federal and state.

Each LLC in New York is treated as a corporation or limited liability partnership. They are subject to Personal Income Tax and Corporate Franchise Tax, which corresponds to the federal income tax classification. 

Depending on the type of taxation you choose for your LLC, the tax obligations will be as follows:

  • LLC as a sole proprietorship: all company income and expenses must be reported on sole proprietor’s personal income tax returns;
  • LLC as a limited liability partnership: you should file the Form IT-204, or Partnership Return Form with the New York City Department of Finance;
  • LLC as a C corporation for federal tax purposes, or an S corporation: you are required to submit a New York State Corporation Franchise Tax Return.

What is the income tax rate in New York State?

Federal taxes 

To keep a New York LLC running smoothly, you need to comply with federal law. Most companies do not need to pay anything to the government. However, they need to report what they have made in forms where they declare their incomes and losses using a 1065 or personal 1040 tax returns. Please note that the payment structure also affects how you report your income. You might need to engage a professional to help you with this especially if you will file a separate corporate tax return.

State taxes

Income

This state is known for its high tax rates, with some parts like New York City charging even higher rates than other parts. The taxes fall into:

  • State income tax: 4-8.82%
  • NYC Income: 3.078-3.876%
  • Sales: 4-8.875%
  • Property: 1.69%
  • Gas: $0.0805 per gallon of gasoline, and $0.08 per gallon of diesel

NYC Income Tax

The state levies an income tax rate of 8.82% which is quite high compared to other regions in the country. Given the progressive taxing system, people earning higher figures part with higher rates. For example, people earning well over $1,077,550 were subject to this rate while those in lower tax brackets paid less. Those earning between $21,400 and $80,650 paid 6.09%. Please note that this applies to single filers. You are thus better off understanding what rate applies to you and what tax credits you can get.

The pass-through nature of LLCs means you don’t pay income taxes as long as you have not made any income or gains, or have made losses or benefited from some deductions. If you do have to pay, you need to file Form IT-204-LL-I within 60 days of the last tax year.

Sales Tax

The NYS sales tax rate starts at 4%, which is quite low compared to other parts of the country. However, there is a catch. On top of this rate, each county collects an additional charge such that you end up paying much higher than this. In New York, for example, you add another 4.875% and end up paying 8.875% in total. In Orange County, you add 4.125% while in Albany, you part with an extra 4%.

On the plus side, not all goods are subject to these taxes. Take an example of foods sold in grocery stores. These are exempt from taxes in most cases. The same applies to clothes and shoes to a limit of $110 sold in NYC. Additionally, LLCs are not subject to an LLC “franchise” tax or “privilege” tax for doing business as this only applies to corporations. Instead, you will only pay the biennial filing fee as well as any other taxes due at the time of filing.

Miscellaneous Taxes

Depending on the nature of your operations, you may also need to pay:

  • Employer taxes: these apply to companies which have employees who will be on a payroll. Ensure you get the necessary paperwork before applying for such payments. You may need to give the IRS a call.
  • Industry taxes: based on the industry in which you operate, you may be subject to other payments. Always check with the governing authority.
  • Other taxes include: unemployment insurance, withholding tax (filing a Form NYS-45) and local taxes to cities.

Does an LLC need a business license in New York State?

Registering your business is a step in the right direction. However, it is not enough. Your business registration only registers the name of your business and allows you to start doing business. But it does not explicitly give you the right to operate in the given industry of your choice. Say for example you want to start a restaurant. You need to get the licensing for this. It can include health and signage permits. Without these, you would operate in violation of the law and can face fines or even worse; a shutdown.

Licensing rules are not universal. Instead, they vary from one state to the other, one county to the next and even one local government to another. It gets even more complicated. Within the state, there are other rule classes, and these come with different fees.

You have to look at your needs on three levels:

  • Federal
  • State
  • Local

You can do a license and permit search function by yourself or you can hire a professional service to navigate these murky waters on your behalf. For new businesses, hiring a third party is always the best option, as it ensures you leave no stone unturned.

What about professional licenses?

Licenses fall into different categories. They can be specific to an industry or profession. In the case of the latter, you need to have pursued studies in the choice of profession e.g., real estate brokerage. Once you have done your exams and passed, you can get the certification from the relevant authority before applying for a license. Tens of professions fall into this licensing; including barbers, notary publics and cosmetologists.

For you to get this licensing, you must be an NYS resident aged at least 17 and armed with an ID, proof of studies and a valid email address. The application can take place on the New York Business Express website.

Do LLCs file annual reports in New York?

In New York State, the annual report is called the a Biennial Statement. Per state regulations, you need to file a statement every two years if you run an LLC. Each filing must accompany a $9 fee which you can pay by card. Luckily, you don’t have to mail anything and you can accomplish the entire process online using the e-statement service. It runs from Monday to Friday from 6 in the morning till 7:30 at night EAT. Please note that you will need your ID as well as the name of the company (as shown in the company records). If you are not sure about its ID and name, you can always do a name search. Additionally, you cannot file before the due date and you need to be aware of when your deadline is to be in line with the regulations.

So, what is this statement?

As per section 301(e) of the LLC law, you must file a statement for your company every two years with the state. In it, you should include who will represent you. In New York, you do not have to designate a special person to handle your legal documents as the secretary of state (SOS) does so by default. However, you will find that most people tend to assign someone or a company to this role for its many benefits which include:

  • Having someone to hold accountable for important papers
  • Not being tied to the office during business hours
  • Not being served in front of your employees and clients
  • Being reminded of deadlines in time

If you choose to have someone else do it (which is advisable), you will include this in the statement. Please note that you are subject to filing regardless of whether you are a domestic or foreign company.

Must you file?

Yes. Once the deadline passes and you are yet to comply with the law, this will reflect on the state’s records. It will be much harder for you to undertake some transactions. Also, if you have recently changed your representation, you will not notify the state and could end up missing out on important announcements. Moreover, you also risk losing your good standing with the state. You are better off on the safe side of things by doing the necessary.

When should you file?

There’s no standard timing for every company. Instead, it depends on when you created your company. Mark that calendar month e.g., May, and every two years make sure you file your statement before that month comes to an end. If you file in April, you will have to do so again in May, as the latter is the correct period.

At the beginning of the filing month, the state often sends an email to prompt you to submit a a Biennial Statement. As long as your details are up to date, you will receive this reminder to help you move things along. Every filing will cost you $9. Unfortunately, you cannot hasten the process. As such, you need to get started early to avoid the last-minute rush.

If you are late, you can always redeem yourself by filing later. However, you should not make this a habit as it could end up costing you in the future. If you’re unable to file the paperwork online, you can contact the state and get a paper form.

How do I file a Biennial Statement in New York?

Online

Generally, you should complete the process online. As long as you’re on time, the page should work and should be available from Monday to Friday.

Email

If you cannot use the online application, you can contact the state via email and request a paper form. In this case, you need to include the name of the company as it is in the registration documents as well as its ID.

Fax

Instead of emailing the state, you can also request the paper by faxing 518-486-4680.


Frequently Asked Question


What is the sales tax in New York?

This New York state tax applies to entrepreneurs handling physical products in the state. They need to get sellers permit which enable them to collect taxes on certain items which they then render to the state periodically.

What is the best NY LLC publication service?

If you are forming an LLC in New York, you will need to meet all state requirements, including publication in a daily and weekly newspaper.
There are three best publication services for a New York LLC that can handle the process of publishing the proof of your formation:

ZenBusiness:

– More than 5,000 reviews;
– The cost of their services is $200 + Publication Fees (calculated in real-time as you fill out the order form);
– They will complete and deliver your certificate of publication on your behalf within the 120-days required by the state of New York.

BizFilings:

– A reasonable rate of $100 + $50 State Fee + Publication Fees;
– Сontrol over publication;
– Excellent reputation and extensive experience.

Harbor Compliance

– Is the best option, if you have a business in an expensive part of New York;
– The price is $699 (includes all fees);
– New York publication service (if you are one of their “Tier 3 customers”).

Senior Business Tax Writer, etc
Jean Wilson Murray
https://bestllcservices.co/
(323) 789-5289
Senior Business Tax Writer, etc
Jean Wilson Murray

In this IncFile vs ZenBusiness review, we're going to compare two of the most popular LLC formation services based on pricing, features, and drawing out differences and similarities to let you see which is most suitable for you and your business.

You can learn more about @Mike here.

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