How to Establish a Sole Proprietorship in New York
To establish a sole proprietorship in New York, here's everything you need to know.
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In New York, you can establish a sole proprietorship without filing any legal documents with the New York State Government. There are four simple steps you should take:
- Choose a business name.
- File a fictitious name certificate with the county clerk’s office.
- Obtain licenses, permits, and zoning clearance.
- Obtain an Employer Identification Number.
To find out how to establish a sole proprietorship in any other state, see Nolo’s 50-State Guide to Establishing a Sole Proprietorship.
1. Choose a Business Name
In New York, a sole proprietor may use his or her own given name or may use a trade name. If you plan to use an assumed name or trade name, state law requires that the name be distinguishable from the name of another company currently on record. It is also a good idea to choose a name that is not too similar to another registered business because of common and federal law trademark protections. To make sure your business name is available, run a search in the following government databases:
2. File a Fictitious Business Name
If you use a business name that is different from your legal name, New York requires you to file a certificate of fictitious business name. This is a mandatory requirement in New York. To file your fictitious business name, you must fill out an application available from the county clerk’s office in the location where you intend to do business. The filing fee will vary depending on the county.
3. Obtain Licenses, Permits, and Zoning Clearance
Your business may need to obtain business licenses or professional licenses depending on its business activities. New York provides a comprehensive website of every profession and occupation that requires a license by any sole proprietorship. A business can obtain this information by going to New York's Online Permit Assistance and Licensing. In addition, local regulations, including licenses, building permits, and zoning clearances, may apply to your business. You will need to check with your city and county governments for more information.
4. Obtain an Employer Identification Number
Sole proprietors who wish to have employees need to obtain an Employer Identification Number, or EIN. This is a nine-digit number issued by the IRS to keep track of businesses. All businesses with employees are required to report wages to the IRS using their EIN. Registering for an EIN can be done online at the IRS website.
Even if you don’t have employees, you may want to obtain an EIN. Some banks require one to open a bank account and it can reduce the risk of identity theft.
In New York, businesses are required to report taxes and file various employee reports. You may need to use your EIN when registering your business to report taxes through the New York Department of Taxation and Revenue. If you have employees, you must report and pay employment taxes on a periodic basis. More information related to employment taxes can be obtained by registering with the New York Department of Taxation and Revenue.
It is important to consider doing the following once you have established your sole proprietorship:
- Open a business bank account. Using your fictitious business name and EIN, you should set up a bank account to keep your business and personal finances separate.
- Obtain general liability insurance. Because sole proprietors are personally liable for all debts and obligations of the business, a business liability insurance policy may be the only form of financial protection against unforeseen events.
- Report and pay taxes. Depending on your specific business activities, you may be required to report such items as sales tax and use tax. You can obtain more information from the New York Department of Taxation and Revenue.