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New York, they say that if you make it there, you can make it anywhere. If you're looking to be a sole proprietor in New York, getting started is pretty easy. As one of the most popular business models, in a sole proprietorship, you own your business as a single individual.
Unlike a corporation or LLC, this one-person business isn't required to be registered with the state. However, you should keep in mind that each state has its own legislation and requirements for sole proprietors. In this guide, you will find the best practices to follow to keep your business thriving as well as protecting it.
What does it mean to start a sole proprietorship in New York?
Being a sole proprietor is pretty great. As the sole owner of your business, you are the captain of the ship and can make your own rules. However, for every action, there is a reaction. Meaning, if you don't carry out your due diligence, you might find yourself in a stagnant situation. Here are a few things to keep in mind to keep your sole proprietorship afloat:
- Bear an empire state of mind: If you recently switched from being an employee to being the founder and CEO of your own business, this is for you. You need to have a macro vision of what you want to achieve and take full responsibility for it.
- Be proactive: Don’t wait around for a sign or for inspiration. Get going even if it’s not the right way to do it, you’ll find out sooner by taking action and correcting your strategy.
- Follow those before you: Not sure where to get started? Take a look at successful people from your industry and find the steps they took to be where they are now.
How to Start a Sole Proprietorship in New York
A lot of people gravitate toward forming a sole proprietorship in New York because it's so easy to get it started. Since there is no formal setup process, all you need to do is start working. Additionally, there’s no paperwork required to set up a sole proprietorship if business owners work under their own personal name.
In general, there isn’t a requirement in New York for sole proprietors to acquire a business license, but depending on the nature of your business you may need other licenses and/or permits. A comprehensive list of licenses and what businesses need them can be found on the licensing section of the New York State government’s website.
It’s also important to keep in mind that just because getting started is that simple, doesn't mean sole proprietors shouldn't look at taking additional steps that could be in their interest along the way.
- Choose a Business Name: As a sole proprietor in New York, you can operate under your legal name. However, using a trade name is a great way to stand out from other businesses in your field as well as market it. To make sure your business name isn't already in use, you can take a look at these websites: New York Department of State and U.S. Patent & Trademark Office.
- Register Your Business Name: To register your business name in the state of New York, you have to file a certificate of assumed name with the county clerk where you’ll be doing business. Even though the fee is usually $25, it may vary depending on the county where you file.
- Get an Employer Identification Number: If you want to hire employees for your sole proprietorship in New York, you'll need to get an Employer Identification Number (EIN). This is a nine-digit number provided by the IRS for tax reporting purposes. To register for an EIN, you can go on the IRS website.
Next Steps After Starting a Sole Proprietorship in New York
Once your sole proprietorship is up and running, it might be helpful to take additional steps. Here are a few things to consider that will help your business run smoothly:
- Open a Business Bank Account: Sole proprietors should keep their personal and business accounts separate to make it easier when tax season rolls around. That way, you can more easily track your business expenses. Some business owners even open business bank accounts in a different bank than their personal account. Research is key for this step so that you can find the best deals for your business, such as discounted fees or business lines of credit. To open the account in New York, you’ll need to go to the bank with your EIN and your business name certificate.
- Get General Liability Insurance: In Sole proprietorships there is no legal distinction between you and your business. This means you alone are completely responsible for all business debts and other liabilities. To safeguard your assets, getting a general business liability insurance is one of the best practices. Even if you work from home, it's likely your homeowners' insurance policy won't cover all your needs.
- Report and Pay Taxes: Depending on your business activities, you may have specific tax filing requirements in New York. For starters, as a sole proprietor, you may need to pay quarterly taxes and the self-employment tax. Additionally, you may be subject to the NYC Unincorporated Business Tax. This tax mainly applies if you have at least $75,000 in gross revenues or $35,000 in profits. For sole proprietors that have employees, you should make sure to register for New York employment taxes. You can learn more about and register for employment taxes at the New York State Department of Taxation and Finance's Business Taxpayer Home Page.