New York also has many top colleges and universities that graduate students every spring, take their graduates into the workforce, and provide enormous value. Since many graduates prefer to live in the city where they attended school, small-scale firms in New York are well-positioned to draw in this talent.

Although New York confers a host of advantages for small-sized companies, it also is not without its flaws, which prospective business owners need to consider. The most notable is that New York is known for the tax code for businesses which is expensive and complex.

Based on the structure of a business's financial statements and its tax requirements, it could be calculated using different methods. Ultimately, the state demands that it choose the one that results in the largest taxes. Although the most tax-friendly treatment for taxation in New York is aimed at C-corporations, the state still requires small companies to have their own.

Corporation Franchise Tax

Small businesses aren't typical C corporations; however, many decide to change when their growth has reached an amount. Knowing how companies get taxed on a state-wide basis will aid business owners in deciding the most appropriate location. For instance, in New York, corporations must pay a franchise tax for their corporations. Although this is common across several States, New York makes it more complicated for businesses to determine the amount of tax due. In addition, the state tries to end all loopholes in financial reporting to cut down on tax burdens. To this end, New York imposes various ways to calculate taxes based on different measures and demands that businesses pay the maximum amount for the taxes based on the method.

Net Income

The most straightforward calculation is based on the total net income, generally the federal tax income. The state makes a few obscure modifications to this amount and taxes the resulting sum at 6.5 percent.

Capital

A company may be taxed on its investment and business capital and liabilities. The tax rate applicable to the amount of capital is 0.025 percent, with a limit of $5 million in tax. Manufacturers who qualify for taxation under this method are limited to $350,000 and only taxed at 0.019 percent.

Fixed Minimum

The fixed dollar method is a method of taxing companies on their gross revenues. The method creates tiers of gross receipts and grants each tier a single price tax in dollars. The tax amounts vary from $25 for businesses with gross receipts under $100,000 to $200,000 for companies with more than $1 billion in gross revenues.

S Corporations

S corporations are a type of business that is S corporate is one of the classic businesses with a distinct designation, called S status. It allows the transfer of income through the business and its shareholders because the business owners have to pay the personal tax due on the money, and not all states tax S corporations.

New York, however, is not among states that require S companies to be liable for franchise tax for corporations. The tax is not a requirement; however, S corporations may use the gross receipt method for calculating taxes and are taxed at a lower rate than traditional corporations.

Anyone who wants to be a New York business seeking S status has to file another form to the state, in addition to submitting the Federal designation forms. If they do not, it could result in the company being taxed like a traditional corporate entity, which will result in the tax bill will be much more almost certainly.

The net profit of the S corporation is passed on to the business owners, and New York also taxes this income. Tax rates for personal income can range between 4% and 10.9 percent.

Limited Liability Companies

As with S corporations like S corporations, limited liability corporations (LLCs) transmit earnings to their owners, who pay personal income tax on the income. LLCs are distinct because they can be classified in any of the following ways: in the form of a partnership, an entity, or, as the most common category, a non-respected entity. LLCs in New York that is classified as corporations pay the franchise tax according to the same rules that apply to traditional corporations.

LLCs that belong to any other category are not subject to the tax; however, they must pay the state filing fee. The fees are calculated based on the gross income of the LLC and can range from a minimum of $25, which applies to LLCs with gross earnings less than $100,000, to a maximum amount of $4,500 for LLCs with gross profits that exceed $25 million.