New York is home to over 19 million people and has a GDP of $2 trillion, making it a favorable place to start a business just based on market size and consumption. New York City also hosts of the largest financial hubs in the world, is a leader in the media landscape, and has its very own Silicon Alley -- the state attracts rich talent pools and investors, making it easier for businesses to access the resources to start up.
However, New York City also ranks as one of the most expensive cities in the world, driving up startup costs, particularly when it comes to real estate and employee compensation.
New York City has its own city sales tax, on top of state taxes. And for local businesses, a congestion tax will be introduced to vehicles entering lower Manhattan which could further increase service and delivery costs.
Frank Sinatra said it best in "New York, New York"
If I can make it there, I'll make it anywhere
There's plenty of opportunity in New York City, but it's offset by the staggering living costs and fierce competition that comes with a dense city.
There are several types of business entities you can choose for your company. Which is best for your business depends on a variety of factors, like ownership in the business, taxation, and more. Each structure has its own one-time formation or set-up cost that varies by state.
Franchise taxes are state fees that businesses pay in order to have the right to operate in those states. They are paid in addition to state and federal income taxes. Here are the franchise tax fees for each business entity structure in this state.
Most states (44 out of 50) levy a corporate income tax.
C-Corps pay a C-Corp state income tax rate.
If the income tax is pass-through, as with S-Corps, use your personal income tax rate.
For LLCs, the tax rate depends on the how you set up the LLC business structure.
The New York Sales Tax Rate ranges from 4.0% to 8.875%.
For most products and many services, the New York City Tax Rate is 8.875% (4.0% State Sales and Use Tax + 4.5% City Sales Tax + 0.375% Metropolitan Commuter Transportation District surcharge).
Clothing and footwear under $110 are exempt from sales tax.
Beauty, health and fitness services and establishments have no state sales tax.
Parking garages are required to pay the city a 10.375% tax plus additional 8% surtax in Manhattan.
The Sales Tax in the rest of New York State is 4.0%.
Exceptions are beauty, health and fitness services and establishments, where there is no state tax.
For more info, visit https://www.nyc.gov/site/finance/business/business-nys-sales-tax.page
Minimum wage in New York State varies depending on location within the state.
The minimum wage is $16.00/hour.
For tipped service employees, the minimum cash wage is $13.35 with $2.65 tip credit (hospitality workers only).
For tipped food service workers, the minimum cash wage is $10.65 with $5.35 tip credit.
The minimum wage is $15.00/hour.
For tipped service employees, the minimum cash wage is $12.50 with $2.50 tip credit (hospitality workers only).
For tipped food service workers, the minimum cash wage is $10.05 with $5.00 tip credit.
The data above is as of January 1, 2024. The state minimum wage will increase by $0.50 per year on January 1, 2025 and January 1, 2026.
Starting 2027, the minimum wage will increase by the three-year moving average of the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) for the Northeast Region.
For more info, visit https://dol.ny.gov/minimum-wage-0
https://dol.ny.gov/minimum-wage-0
https://www.nyc.gov/site/finance/business/business-nys-sales-tax.page
These costs are similar across states. We estimate the total non-state specific costs to be $XXX. Link to Overall Costs page.
Summing up the above fees, we estimate the total cost for starting a business in this state to be:
$XX