LLC vs S-Corp in New York

New York has some of the most expensive LLC formation and annual compliance costs in the country because of the LLC publication requirement. Factor that into the LLC vs S-corp decision before you file. New York Department of State (DOS) handles the entity filing. The IRS handles the federal tax classification. New York Department of Taxation and Finance handles the state tax treatment. New York LLC basics. - Articles of Organization filed with NY Department of State. Check the DOS limited liability company page linked below for the current filing fee. - Publication requirement. Within 120 days of formation, a new LLC must publish a notice in 2 newspapers (1 daily, 1 weekly) for 6 consecutive weeks, in the county designated in the Articles. Newspapers are selected by the county clerk. Costs vary widely by county. New York County (Manhattan) publication typically runs into 4 figures. Upstate counties are materially cheaper. After publication, the LLC files a Certificate of Publication with DOS with an additional fee. LLCs that miss the publication deadline have their authority to do business in New York suspended until cured. - Annual filing fee. New York charges LLCs and LLCs taxed as partnerships a separate annual state filing fee on Form IT-204-LL, based on New York source gross income. Tiers range from $25 at the bottom to several thousand dollars at the top. See the NY Department of Taxation and Finance link below for the current tiers. New York S corp basics. - A federal S corp election does not automatically flow through to New York. Separate New York election on Form CT-6 is required to be treated as a New York S corp. Without the New York election the S corp is taxed as a C corp for New York purposes. - New York S corps pay a fixed-dollar minimum tax that varies by New York receipts. - New York City imposes its own General Corporation Tax and Unincorporated Business Tax. NYC does not recognize federal S corp status for its General Corporation Tax. NYC LLCs and partnerships may owe UBT. NYC corporations owe GCT. Run the NYC-specific numbers before you elect. - Pass-through entity tax. New York has an elective pass-through entity tax (PTET) that can let qualifying entities pay state income tax at the entity level, which helps owners work around the federal $10,000 state-and-local-tax cap. Separate NYC PTET also exists for qualifying entities. Check the state and city links below for current eligibility and rates. Rule of thumb. Form the LLC outside New York County if your home base makes that legitimate, to reduce publication cost. Consider electing S corp at both the federal and New York levels once profit after reasonable owner wages clears the added payroll, NYC tax, and accounting costs. A CPA who files NYS and NYC business returns should run the breakeven for your specific numbers. New York is the state where picking the wrong structure costs the most.