Starting a Business in New York: The Licensing Requirements

Starting your own business can be a fulfilling and rewarding endeavor, but it also comes with administrative and legal hassles. Apart from correctly incorporating your business, hiring employees, protecting intellectual property and developing marketing, there are a number of logistical considerations you must also address to begin conducting business.

5 Licenses and Permits You Need to Conduct Business in New York

One of these is obtaining the necessary licenses and permits. If State or Federal Authorities require documentation to conduct your business operations, failure to comply with such regulations presents exposure to heavy fines.

This post covers the five licenses and permits you will most likely need to conduct business in New York.

Permit to Conduct Business

In New York, as in any other state, you will need to register with the State in order to legitimately conduct business. Registering your business requires you to make several long-term decisions impacting your business, and therefore requires significant consideration. For example, at the time of registration you must decide on your name (affecting future possible trademark disputes) and the structure of your entity (affecting taxation and future investment potential). Depending on the structure of your entity, you will need to register with either the NY Secretary of State (Corporations, Limited Partnerships and Limited Liability Companies), or the County Clerk’s Office (Sole Proprietorships and General Partnerships). If your corporation is incorporated elsewhere, say Delaware, to conduct business in New York, you will need to file for a foreign (out-of-state) business license with the New York State Department of State.

Employment associated filing requirements

Before you hire your first employee, you will need to acquire an Employer Identification Number (EIN) from the Internal Revenue Service (IRS). The EIN is a 9-digit number that lets the IRS keep track of tax accounts of various business entities. If you form a corporation, partnership, or intend to hire employees other than yourself, then an EIN number is a requirement. Your corporate attorney can help determine whether or not you need an EIN and when and how to apply for one.

Sales Tax License

If your business is selling certain specified goods and services in New York State, you will be required to register with the Tax Department to obtain a Certificate of Authority from the State. The Certificate of Authority permits you to collect sales tax from your customers on each sale.

The requirements to pay sales tax depend on the kind of activity your business conducts. While different states vary on sales tax regulations, generally, you must collect sales tax on most tangible goods and services delivered to consumers in a state where you have a physical presence. Some typical exceptions to the general rule include: products for re-sale, wholesale products, prescription drugs, raw materials, and agricultural products.

In New York, the physical presence requirement includes having “affiliated persons” who solicit business, make deliveries, or have an interest in the business. This so-called “Amazon tax" is being implemented on a state-by-state basis in order to require e-commerce companies to collect sales tax. The divided state approaches make it difficult for e-commerce companies to navigate the patchwork of regulation, so make sure to consult a lawyer to ensure compliance.

 You must register with the New York Tax Department at least 20 days before you begin business. It is important to note that conducting business without registering could result in a fine of up to $10,000.

Local zoning requirements

Local zoning requirements are important when it comes to purchasing property for your business or altering the use of a pre-existing property. New York has three zoning districts: Residential, Commercial and Manufacturing. Depending on the nature of your business, you must ensure that the space you work out of falls under the relevant zoning district. Typically, the person constructing a building will need prior approval from the Department of Buildings, so you should ideally confirm with the Seller or Lessor of the property that it is compliant.

Federal Licenses and Permits

When a small business’s product or service is regulated by a federal agency, it will be required to obtain a federal license or permit. Your business will need a federal permit or license to operate within these sectors. A few examples include: Alcoholic beverages, Agriculture, Transportation and Logistics, and Radio and Television. A different regulator controls each sector, and therefore the application process also varies by sector.

It is important to manage, comply with and maintain your licenses. As a best practice, keep copies of all your permits and mark dates for renewals. Many licenses and permits may have accompanying rules and obligations.