New York is one of the most popular cities in the world for foreign investors seeking new business opportunities.
The procedure to open a company is generally simple and fast. However, it is important to respect certain essential steps, mainly as an expatriate in the USA.
Find out why it is interesting to start a business in New York and what you need to consider to make your project a reality.
Starting a Business in NY: Pros and Cons
Before embarking on your entrepreneurial adventure, it is important to know the advantages and disadvantages of starting a business in New York.
The Advantages of Starting a Business in NY
New York is a great place to start a business for several reasons:
- It is one of the most densely populated cities in the United States
- The New York economy is very dynamic and offers many opportunities in almost every industry
- New York State offers certain tax advantages for new businesses
- Starting a business is quick and easy, even as a non-resident
- Accounting is simplified
- Opening a business in New York is very beneficial for the brand image on American soil and worldwide
Disadvantages to Consider Before Starting a Business in NY
The main disadvantage to take into account is the large number of taxes to which companies are subject. Indeed, it can be difficult to manage all the fees to be paid as an expatriate who starts in New York.
In order to evolve in the best conditions, it is strongly recommended to be accompanied by a local chartered accountant.
A second disadvantage encountered by some expatriates is the difficulty of adapting to the fast pace of business in New York. Many companies cannot keep up with the pace and quickly close their doors.
New Yorkers are used to getting a product or service instantly. If you can’t meet their demands, they will go straight to the competition.
How to Start a Business in NY as an Expatriate
Although there are many more advantages than disadvantages to doing business in New York, you should not start your own business overnight.
Starting a business in the United States is a complex project that requires careful preparation and the respect of several essential steps.
Obtaining an Investor Visa
In order to start a business in New York, it is necessary to obtain a temporary E-1 or E-2 visa. These visas are specifically intended for entrepreneurs who wish to start and run a business in the United States.
There are many conditions to fulfill and administrative steps to follow to obtain this type of visa.
You can find official information on the website of the Embassy and Consulates of the United States of America in your country.
Choosing the Right Legal Status for Your Business
After conducting a thorough market study to verify the relevance of your project, you must choose the most suitable legal status for your business in New York.
The three most popular legal forms to create a business in the USA are Limited Liability Company (LLC), Corporation, and Sole Proprietorship.
Limited Liability Company
The LLC status is the most popular in the USA for business creation. It offers a lot of flexibility in the management of the company and limits the personal liability of the partners to the number of their contributions.
The profits of an LLC are directly distributed to its members without being taxed at the corporate level. The members of the corporation pay the tax on the profits on their personal income tax return.
An LLC can be formed by one person but can also have an unlimited number of members.
A business can also be registered as a corporation. This status is more suitable for medium and large businesses.
Although most corporations are owned by several people, the shareholders, it is possible for a corporation to be formed by a single member.
The day-to-day management of the corporation is delegated to several people (president, treasurer, managing director, etc.) by the shareholders at the annual general meeting.
The profits of a corporation are taxed once at the corporate level. They are taxed again at the personal level in case of dividend distribution to the shareholders.
This status is the equivalent of auto-entrepreneur status. This legal structure allows you to create and manage your company alone. You are personally liable in case of debts or bankruptcy.
The income you generate through your activity is directly taxed at the time of your personal income tax return.
This is an ideal choice for freelancers. If you plan to hire full-time staff, this structure is not recommended.
Summary Table of the Advantages and Disadvantages of Each Structure
Here are the main advantages and disadvantages of each structure:
|LLC||– No liability of the members on their personal assets|
– Taxation of profits at a single level
– Simple management
– Little bureaucracy
– Simple and quick creation of the company
– Unlimited number of members
|– Cost of registering the corporation ($200 in NY)|
– Annual tax on LLC income ($25 min – $4,500 max)
– Difficulty in obtaining outside investment
|Corporation||– The company is a legal entity legally distinct from the shareholders and directors|
– Possibility to easily sell shares to acquire financial capital
|– Double taxation of profits|
– The creation of the company takes time and involves many administrative steps
– More complex management
|Sole Proprietorship||– No specific administrative steps to start the activity|
– No corporate taxes
– No specific accounting
– Simple management
|– Personal liability incurred|
– Unable to hire staff
– Difficult to obtain outside funding
– May be perceived as unprofessional in the U.S.
Main Steps to Starting Your Business in New York
Once you have determined the best legal structure, here are the essential steps to follow when forming your business in New York:
- Choose the name of your company by verifying that it is available on the New York State corporate database
- File your company’s articles of incorporation with the New York State Department of Commerce and pay the registration fee
- Obtain your EIN (Employer Identification Number) online from the IRS website
- Register your business in all other states in which you wish to conduct business
- Open a bank account with a U.S. bank.
New York is a city that offers many advantages to entrepreneurs who wish to open a new business. However, there are many conditions to fulfill in order to be able to operate as an expatriate.
It is, therefore, important to be accompanied by local professionals who are able to help you realize your project with peace of mind. Ask for advice from a law firm specializing in business law in New York.