Starting a Business in New York

A new business in New York can be yours. So have you been wondering: how do I start a business in New York? And more importantly, can I do so no matter what the economic conditions are? Can I start a new business in New York during a recession?

New Business in New York: Advantages and Disadvantages

Business Insider puts New York in its middle ten states for starting a new business, per a 2016 article. And this is for the whole country. New York’s density of startup businesses is also somewhat high.

In addition, New York reports the fourth highest per capita GDP in the nation, at $63,929. New York also has better than average numbers for the rate of new business owners.

Recent Changes

In 2018, Forbes put New York at number 26. Also in 2018,  Fit Small Business clocked in New York at number 39. Keep in mind, all three sites use differing methodologies.

Also, remember this is for the entire state and not just New York City.

Forbes praises New York for a better than average quality of life. Economic climate and growth prospects are around average. Regulatory environment is about average, but labor supply and business costs are worse than average.

Fit Small Business says New York is sixth-best for startup activity. The state also scored well for quality of life, labor market, and access to capital. Labor market is a measure of the desirability of an area and the number of people with bachelor degrees. The costs of starting a business are worse than average.

But New York really falters when it comes to cost of living (number 48) and taxes (second-worst in the entire country).

Only you can decide if it is worthwhile to start up in the Empire State. Rural and urban areas will undoubtedly have differences in terms of quality of life, cost of living, and access to capital. So where in New York you are thinking of starting a business will make a difference.

Start a New Business in New York – New York Top Industries

Per the New York State Department of Labor, the biggest industries in New York are construction and information. More top industries in New York are trade, transportation, and utilities.

Top industries are also financial activities; and professional and business services.

Yet more top New York industries are educational services; health care and social assistance. There are also leisure and hospitality; and undefined ‘other’ services.

New York State is a lot more than just New York City.

Smart business owners can find new opportunities. Work with bigger industries in the state. Offer goods or services such as data and other computer work such as programming. Another idea is trucking for any industry or food service and catering. Yet another idea is chemical and pharmaceutical support for health care facilities.

Here is how to start a new business in New York.

Start a New Business in New York – New York New Business Secretary of State Requirements

Register a Business Name

Filing for a fictitious name, or “Doing Business As”, involves making a business name that differs from a business owner’s personal name. Check availability and then register it with the appropriate county clerk office. The cost will vary between counties.

This procedure is necessary when registering a corporation, limited liability company or partnership. But it is optional for businesses based upon sole proprietorships.

Business Permits and Licenses

The State of New York offers a useful quiz that will tell you what licenses or permits you need.

Corporations

Corporate names must be unique. To make sure a name is not in use, perform a thorough search of online databases and other records. There is a database of corporations registered in New York. Search at New York Corporation.

Or request a search of name availability by sending name or names to the Department of State, Division of Corporations, One Commerce Plaza, 99 Washington Avenue, Albany, NY 12231.

Corporate Name Reservations

A business owner may want to reserve a certain corporate name if they do not plan to file a Certificate of Incorporation right away.  The filing fee is $20.00 and the name that they submit will then be on reserve for a period of 60 days. Find the application form to reserve a corporate name at Reserve a New York Corporation Name.

Local Permits and Licenses

Make sure to check out this helpful directory of all the New York county clerks.

The New York Division of Corporations with the New York Department of State is where you can file paper forms or file online.

Tax Registration

So all needed forms, instructions, and registration are with the New York State Department of Taxation and Finance.

Start a New Business in New York – Virtual Offices

Alliance has New York virtual business office space in the following cities.

New York City and Long Island

Alliance has space in the Bronx, Brooklyn, and Melville, which is on Long Island. They also have space in New York City (Manhattan), and in Southampton, another town on Long Island.

North of New York City

Alliance also has office space in Albany, Rochester, and White Plains.

So go to Regus for Buffalo and Rochester.

Also, go to DaVinci for these cities.

New York City and Long Island

DaVinci has space in East Northport (Long Island), Fresh Meadows, and Garden City (Long Island). They also have space in Jericho and Uniondale. Those towns are both on Long Island.

North of New York City

DaVinci has space in Corning, Harrison, Malta, and New Rochelle.

So for Binghamton, Syracuse, or Watertown, and for other parts of the state, ask local business owners. Or try computer user groups.

Other options are virtual business office space in nearby states. These are Connecticut, Massachusetts, New Jersey, Pennsylvania, and also Vermont.

Start a New Business in New York – Establish Business Credit

Company credit is credit in a business’s name. It doesn’t link to an entrepreneur’s individual credit, not even if the owner is a sole proprietor and the only employee of the company.

Accordingly, a business owner’s business and individual credit scores can be very different.

The Benefits

Because company credit is distinct from individual, it helps to secure an entrepreneur’s personal assets, in the event of court action or business bankruptcy.

Also, with two separate credit scores, a small business owner can get two separate cards from the same vendor. This effectively doubles purchasing power.

Another advantage is that even startup companies can do this. Going to a bank for a business loan can be a formula for disappointment. But building company credit, when done right, is a plan for success.

Personal credit scores depend upon payments but also other elements like credit usage percentages.

But for business credit, the scores truly just hinge on whether a company pays its invoices timely.

Learn more here and get started toward building business credit attached to your company’s EIN and not your SSN.

The Process

Building business credit is a process, and it does not happen automatically. A company must proactively work to establish company credit.

Having said that, it can be done easily and quickly, and it is much speedier than developing personal credit scores.

Vendors are a big part of this process.

Undertaking the steps out of sequence will lead to repetitive denials. No one can start at the top with small business credit. For instance, you can’t start with retail or cash credit from your bank. If you do, you’ll get a rejection 100% of the time.

Start a New Business in New York – Company Fundability

A small business must be fundable to lenders and merchants.

Hence, a company will need a professional-looking web site and email address. And it needs to have website hosting from a company like GoDaddy.

Also, company phone and fax numbers must have a listing on ListYourself.net.

At the same time, the company phone number should be toll-free (800 exchange or the equivalent).

A small business will also need a bank account devoted solely to it, and it needs to have every one of the licenses essential for running.

Learn more here and get started toward building business credit attached to your company’s EIN and not your SSN.

Working with the Internal Revenue Service

Visit the IRS web site and acquire an EIN for the company. They’re totally free. Select a business entity such as corporation, LLC, etc.

A business can get started as a sole proprietor. But they will most likely want to switch to a sort of corporation or an LLC.

This is in order to limit risk. And it will make the most of tax benefits.

A business entity will matter when it concerns tax obligations and liability in case of a lawsuit. A sole proprietorship means the owner is it when it comes to liability and tax obligations. No one else is responsible.

Sole Proprietors Take Note

If you run a small business as a sole proprietor, then at the very least be sure to file for a DBA. This is ‘doing business as’ status.

If you do not, then your personal name is the same as the company name. Hence, you can find yourself being personally accountable for all company financial obligations.

In addition, per the Internal Revenue Service, with this structure there is a 1 in 7 chance of an IRS audit. There is a 1 in 50 possibility for corporations! Avoid confusion and substantially decrease the odds of an Internal Revenue Service audit simultaneously.

Starting the Business Credit Reporting Process

Start at the D&B website and get a totally free D-U-N-S number. A D-U-N-S number is how D&B gets a business in their system, to produce a PAYDEX score. If there is no D-U-N-S number, then there is no record and no PAYDEX score.

Once in D&B’s system, search Equifax and Experian’s sites for the small business. You can do this at fastcs.wpengine.com/reports. If there is a record with them, check it for correctness and completeness. If there are no records with them, go to the next step in the process.

By doing this, Experian and Equifax will have activity to report on.

Vendor Credit Tier

First, you should establish trade lines that report. This is also referred to as the vendor credit tier. Then you’ll have an established credit profile, and you’ll get a business credit score.

And with an established business credit profile and score you can begin to obtain credit in the retail and cash credit tiers.

These types of accounts often tend to be for the things bought all the time, like marketing materials, shipping boxes, outdoor work wear, ink and toner, and office furniture.

But first off, what is trade credit? These trade lines are credit issuers who will give you preliminary credit when you have none now. Terms are typically Net 30, instead of revolving.

Therefore, if you get an approval for $1,000 in vendor credit and use all of it, you need to pay that money back in a set term, like within 30 days on a Net 30 account.

Details

Net 30 accounts must be paid in full within 30 days. 60 accounts need to be paid fully within 60 days. Unlike with revolving accounts, you have a set time when you have to pay back what you borrowed or the credit you used.

To launch your business credit profile the proper way, you ought to get approval for vendor accounts that report to the business credit reporting bureaus. Once that’s done, you can then use the credit.

Then pay back what you used, and the account is on report to Dun & Bradstreet, Experian, or Equifax.

Vendor Credit Tier – It Makes Sense

Not every vendor can help in the same way true starter credit can. These are merchants that will grant an approval with nominal effort. You also want them to be reporting to one or more of the big three CRAs: Dun & Bradstreet, Equifax, and Experian.

You want 5 to 8 of these to move onto the next step, which is the retail credit tier. But you may have to apply more than one time to these vendors. So, this is to verify you are responsible and will pay in a timely manner.

Retail Credit Tier

Once there are 5 to 8 or more vendor trade accounts reporting to at least one of the CRAs, then move to the retail credit tier. These are companies such as Office Depot and Staples.

Just use your SSN and date of birth on these applications for verification purposes. For credit checks and guarantees, use the small business’s EIN on these credit applications.

One good example is Lowe’s. They report to D&B, Equifax and Business Experian. They want to see a D-U-N-S and a PAYDEX score of 78 or more.

Fleet Credit Tier

Are there 8 to 10 accounts reporting? Then move to the fleet credit tier. These are businesses such as BP and Conoco. Use this credit to buy fuel, and to repair, and maintain vehicles. Only use your SSN and date of birth on these applications for verification purposes. For credit checks and guarantees, make certain to apply using the business’s EIN.

One such example is Shell. They report to D&B and Business Experian. They need to see a PAYDEX Score of 78 or higher and a 411 small business phone listing.

Shell may claim they want a certain amount of time in business or revenue. But if you already have sufficient vendor accounts, that won’t be necessary. And you can still get an approval.

Learn more here and get started toward building business credit attached to your company’s EIN and not your SSN.

Cash Credit Tier

Have you been sensibly managing the credit you’ve gotten up to this point? Then progress to the cash credit tier. These are service providers such as Visa and MasterCard. Only use your SSN and date of birth on these applications for verification purposes. For credit checks and guarantees, use your EIN instead.

One example is the Fuelman MasterCard. They report to D&B and Equifax Business. They want to see a PAYDEX Score of 78 or more. And they also want you to have 10 trade lines reporting on your D&B report.

Plus, they want to see a $10,000 high credit limit reporting on your D&B report (other account reporting).

Additionally, they want you to have an established company.

These are businesses such as Walmart and Dell, and also Home Depot, BP, and Racetrac. These are often MasterCard credit cards. If you have 14 trade accounts reporting, then these are in reach.

Start a New Business in New York – Monitor Your Business Credit

Know what is happening with your credit. Make sure it is being reported and attend to any mistakes as soon as possible. Get in the habit of taking a look at credit reports and digging into the details, and not just the scores.

We can help you monitor business credit at Experian and D&B for only $24/month. See: fastcs.wpengine.com/monitoring.

Update Your Records

Update the information if there are errors or the relevant information is incomplete.

Fix Your Business Credit

So, what’s all this monitoring for? It’s to contest any inaccuracies in your records. Mistakes in your credit report(s) can be fixed. But the CRAs typically want you to dispute in a particular way.

Disputes

Disputing credit report mistakes commonly means you mail a paper letter with copies of any proofs of payment with it. These are documents like receipts and cancelled checks. Never mail the original copies. Always mail copies and retain the original copies.

Fixing credit report errors also means you precisely spell out any charges you contest. Make your dispute letter as understandable as possible. Be specific about the issues with your report. Use certified mail so that you will have proof that you mailed in your dispute.

Start a New Business in New York – A Word about Building Business Credit

Always use credit responsibly! Never borrow more than what you can pay off. Keep an eye on balances and deadlines for repayments. Paying off on time and completely will do more to raise business credit scores than virtually anything else.

Growing small business credit pays off. Good business credit scores help a company get loans. Your loan provider knows the company can pay its financial obligations. They know the small business is authentic.

The company’s EIN links to high scores and credit issuers won’t feel the need to request a personal guarantee.

Business credit is an asset which can help your company in years to come.

Learn more here and get started toward opening a new business in New York.

Want to start a new business someplace else in America? Then check out our handy guide to starting a business in any state in the country

New York’s Response to COVID-19

Here’s what New York is doing about COVID-19. On March 8, New York City Mayor Bill DeBlasio announced the City will provide relief for small businesses across the City seeing a reduction in revenue because of COVID-19. Businesses with fewer than 100 employees who have seen sales decreases of 25% or more will be eligible for zero interest loans of up to $75,000 to help mitigate losses in profit.

See: nyc.gov/site/sbs/businesses/covid19-business-outreach.page

On March 17, Senator Pam Helming and Assemblyman Colin J. Schmitt called for the establishment of a $890 million Small Business Emergency Assistance Fund for the State of New York. The $890 million would come from state settlement funds that are currently earmarked for use during economic uncertainty. 

See: fingerlakes1.com/2020/03/17/legislative-solution-small-businesses-across-nys-look-for-help-hope-as-covid-19-outbreak-worsens