Steps to Start a Sole Proprietorship in New York
If you want to start a business without any partners, all by yourself then it is time to file a sole proprietorship in NY State. The state of New York has different requirements for this type of a business structure and as the owner you will be required to fulfill them or be compliant with them. If you are wondering how to start a sole proprietorship in NY then just like any other form of business, there are several aspects and processes to consider. Let us look into these processes in detail as they will enable you to help set up the business and run it smoothly.
1. Prepare a business plan
A business plan is one of the most important areas to focus on before you file a sole proprietorship in NY State. A business plan is considered to be a strategic plan that encompasses marketing, sales, and finance. The role of a business plan is to help you identify the various aspects and areas of a business that you should prioritize. The process of preparing this document will require you to conduct in-depth market research, which will help in not only developing your business idea further but assist with how to start a sole proprietorship in NY, implement good practices and achieve higher growth and sustenance. Some of the components of a good business plan for a sole proprietorship include:
Components of a Business Plan
- Statement of Purpose (Mission Statement)
- Description of the Business
- Products or Services
- Personnel and management
- Methods of Record Keeping
- Marketing Plan
- Methods of Distribution
- Summary of Financial Needs
- Financial goals and projections
2. Choose an NY business name
One of the important processes before you file a sole proprietorship in NY State is to identify a business name. It is important to ensure the name of your sole proprietorship is creative and distinct. Here are some tips that will help you in choosing a New York business name:
- Keep it as simple as possible and it should be easy to pronounce
- The business name should represent your business, products, or services
- Try to pick a name that is not limiting as your business may expand or grow in the future
- Conduct a business name search over the internet to get an idea
- Try choosing a name that conveys meaning and sounds positive
- Once you have identified a name, conduct a copyright or trademark search
- It is also important to ensure the availability of a domain name
3. Form the sole proprietorship
If you are planning to start a sole proprietorship in New York as a domestic or foreign entity then you will be required to file a Certificate of Assumed Name pursuant to NY Gen Bus L § 130 (2020). An assumed name is known as a New York DBA (Doing Business As) or a fictitious business name and without this, you will not be able to transact business in this state. You will have to file the Certificate of Assumed Name with the New York Department of State, Division of Corporations along with a $25 filing fee.
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4. File fictitious business name
Normally, sole proprietorships use a DBA also known as an assumed name as the business is not a separate legal entity from the owner. You will need to file a New York DBA only if you don’t want to conduct business under your own name.
For example: If an individual named Claude James wants to start a sporting goods store in New York, he can simply use his own name ‘Claude James.’ If he wants to name it Claude’s Sporting Goods and wants to do business under this name then he will need to file a New York DBA.
The process for using a DBA or “doing business as” name is as follows:
- You need to identify a name like Claude’s Sporting Goods depending on the primary business activity
- The business name should be kept simple and also relate to the product of services being offered like Mannie’s TV Repair
- Once you have identified a business name, you need to also conduct a New York DBA name search with the Trademark Electronic Search System (TESS) of the U.S. Patent & Trademark Office
If your chosen name is available and has no trademark issues then you can simply go ahead and file a sole proprietorship in NY State.
5. Get an EIN
An EIN or Employer Identification Number is also known as the Federal Employer Identification Number (FEIN). It is a unique number that is assigned by the Internal Revenue Service (IRS) to business entities. If you file a sole proprietorship in NYS then ideally you will be filing taxes on your personal tax returns and hence will need a Social Security number (SSN). There are instances in which a sole proprietorship may be required to apply for and obtain an EIN. Such instances according to the IRS are:
6. Obtain the necessary licenses and permits
Once you start a sole proprietorship in Texas, one of the foremost requirements is that of a business license. It is important to note that the state of New York does not require a license or permits to operate a sole proprietorship business but some professions may require state licensing. Some of the professions that require licensing after you form a sole proprietorship in NY online include:
- Public Accountancy
- Interior Design
- Athletic Training
- Clinical Laboratory Technology
- Veterinary Medicine
- Social Work
You may also be required to obtain local licenses depending on the city or county where you plan to start a sole proprietorship in New York. Different counties and cities have different licensing and business permit requirements including zoning and building permits. If you are wondering how to start a sole proprietorship in NY and obtain the right business license, then our Business License Research Report service can help you. This is a detailed research report that contains a list of filing instructions, supporting document requirements, and fees for all business licenses and permits for your sole proprietorship business in New York. Business License Research Report service can help you. This is a detailed research report that contains a list of filing instructions, supporting document requirements, and fees for all business licenses and permits for your sole proprietorship business in New York.
7. Open a bank account for your New York business
A sole proprietorship business as the name suggests has a single owner. The taxes are also filed on the personal income tax return of the owner. Hence, it is very important to keep your personal gain and revenue generated by the business separately. This is possible if you start a business bank account. You can open this separate account before or after you start a sole proprietorship in New York.
The business bank account is also known as a checking account and it has a variety of benefits, which may vary from one bank to another. Some of the most common benefits are:
- A business account will keep your business finances separate
- A checking account will keep your payments received or sent organized
- It will also organize accounting records and thus ensure a clear audit process
- It will ensure easy filing of your tax return
- Depending on the bank, you will be able to leverage overdraft protection
8. Report and pay taxes
When you file a sole proprietorship in NY State, you have to keep in mind that for tax purposes, you and your business are the same. As a result, you will not be required to file tax returns separately for your business. Instead, you will have to report the income earned through your personal tax return. You have to report all income earned during a year to the New York State Tax Department using a Federal 1040, Schedule C, Profit or Loss from Business (Sole Proprietorship) form.
When you form a sole proprietorship in NY online, apart from a personal tax return, you may be required to collect state sales taxes if your sole proprietorship is selling goods or products in the state. You will have to apply for a Certificate of Authority for the same and file NY State Sales and Use Tax.