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New York is one of the leading hubs for international business and trade. The US, with its mature economy and established financial market, is also a fantastic place for overseas businesses to establish subsidiaries and holding companies.

The New York Metropolitan Area has a GDP of approximately $1.5 trillion which makes it the biggest regional economy within the US. 42 Fortune 500 companies have their headquarter offices in New York. Midtown Manhattan is the central business district and is also home to the New York Stock Exchange and the NASDAQ, the two largest stock exchanges in the world. New York will continue to be the one of the best global locations for setting up businesses.

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Types of New York entity

There are several options available to overseas companies seeking to create a presence in New York. The type of entity that is ultimately chosen will depend upon a number of factors including, for example:

  • the expected nature and scale of the business activities;
  • the levels of risk anticipated in the initial stages;
  • the intended duration of the business activities;
  • accounting and taxation considerations;
  • New York statutory compliance and reporting obligations; and
  • commercial considerations

The most commonly encountered corporate structure for overseas companies looking to enter the New York market is Corporation.

For some types of business, an alternative corporate structure, such as a Limited Liability Company (LLC) or Partnership, may be more appropriate.

  • LLC: A New York limited liability company (LLC) is an unincorporated organization, with one or more members, each having limited liability for the contractual obligations and other liabilities of the company. Each member offers a capital contribution in return for an ownership percentage.
  • Corporation: The New York Corporation will be able to issue shares of stocks to employees and investors, unlike an LLC in New York.
  • Partnership: For New York State income tax purposes, a partnership is a syndicate, group, pool, joint venture, or other unincorporated organization that is carrying on a trade or business and is classified as a partnership for federal income tax purposes.

New York taxation

Which taxes should you be aware of, what rates should you pay and what are your obligations?

  • Income Tax: New York state income tax rates are 4%, 4.5%, 5.25%, 5.9%, 5.97%, 6.33%, 6.85%, 9.65%, 10.3% and 10.9%. New York state income tax brackets and income tax rates depend on taxable income and filing status. Also, residency status determines what’s taxable. New York City and Yonkers have their own local income tax on top of the state tax. New York City income tax rates are 3.078%, 3.762%, 3.819% and 3.876%. There are three types of residency statuses when it comes to New York state tax. They determine what portion of your income the state will tax: Resident, Part-year resident and Non-resident.
  • Social Security and FICA: Most employees and employers each pay Social Security and Medicare taxes on Social Security and Medicare covered wages. These taxes comprise FICA (Federal Insurance Contributions Act). The Social Security portion of FICA is 6.2% of the maximum taxable wages. If you reach the maximum payment, you do not pay any more Social Security tax until the next calendar year. The Medicare portion of FICA is 1.45% for wages up to 200,000 and 2.35% for wages above $200,000. There is no cap on wages for the Medicare portion of FICA.

Sales Tax

It’s a consumption tax on goods and services in New York.

  • What is the Sales Tax rate in New York: The New York state sales tax rate is currently 4%. Depending on local municipalities, the total tax rate can be as high as 8.875%.
  • Who needs to pay Sales Tax: You’ll need to collect sales tax in New York if you have nexus there. There are two ways that sellers can be tied to a state when it comes to nexus: physical or economic. Physical nexus means having enough tangible presence or activity in a state to merit paying sales tax in that state. Economic nexus means passing a states’ economic threshold for total revenue or the number of transactions in that state.
  • Further information: You should seek expert advice to make sure that you are paying the correct rate of Sales tax and if your supplies will be treated as taxable supplies of goods or services. Furthermore, penalties can be levied for not registering at the correct time, for claiming Sales Tax incorrectly or not accounting for Sales Tax correctly on sales.

Setting up the office

The “perfect” office is different for everyone. A start-up might benefit from being in a collaborative co-working environment, whereas a well-established brand may feel more at home in their own space. The good news is, with plenty of flexible workspace in New York and counting, there’s a match out there for every business.

Which office type should I choose?

All flexible workspaces have one thing in common: licence agreements. Unlike a lease, a licence agreement allows you to rent an office for shorter periods of time and there’s room for negotiation. Also, monthly all-inclusive billing makes it easier to keep track of cash flow.

  • Co-working: If you’re a solopreneur or manage a small team, you might decide to rent desks in a co-working space. Many run events for members, enabling you to network and grow.
  • Private office: If you want your own space, you can rent a private office in a flexible workspace. Shared amenities mean you’ll still pay a competitive price and get to meet other businesses.
  • Managed office: Designed with medium to large businesses in mind, a managed solution provides a self-contained, customisable workspace solution on flexible contractual terms.

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