Opening a business in New York is great, but unfortunately, you may have some complicated tax issues to deal with. Here’s what you need to know about small business taxes in New York.
What Amount of Business Income Is Taxable in New York State?
The amount of your business income that is taxable will depend in large part on the type of business you own.
How Much Does a Typical Small Business Pay in Taxes?
How does the type of business you own determine your New York state business tax? When it comes to New York business tax, if you own a corporation, you need to pay a corporation franchise tax. This is not as common for small businesses, but it is possible, especially as you expand. It is calculated in four possible ways. The New York State business tax you are required to pay will be the highest number you calculate. The possibilities are:
- Net income – this is your state adjusted federal taxable income taxed at 7.1 percent with some exceptions.
- Minimal taxable income – this is like net income but with federal adjustments, taxed at 1.5 percent, .75 percent for qualified manufacturers.
- Business and investment capital minus liabilities – this method applies a .15 percent tax rate with a cap at one million dollars. The cap is $350,000 for qualified manufacturers.
- Fixed dollar minimum – This method assigns a flat tax amount to various tiers of gross receipts.
For most small businesses, especially new ones, these rules probably will not apply. You will probably have a sole proprietorship, in which case you would only pay personal income tax on the taxable income from your business, a partnership, which is similar, except you also have to pay a state filing fee or an LLC, which we’ll discuss below.
How Is an LLC Taxed in New York?
What about New York City LLC tax? The way an LLC is taxed in New York City or anywhere in New York state works a little differently. What you will pay in taxes will depend on how your LLC is structured.
What Percentage of Taxes Will an LLC Pay?
Like partnerships, sole proprietorships and S-corporations, LLC owners pay personal income tax on the income that passes through the business to them. However, how the rest of the money is taxed depends on their classification. They may be classified as a:
- Corporation
- Partnership
- Disregarded Entity
If your LLC is classified as a corporation, you follow the corporation franchise tax rules above. If you are a partnership or disregarded entity, you only need to pay state filing fees in addition to personal income tax. These fees are based on your gross income and can range anywhere from a minimum of $25 to a maximum of $4,500.
Dealing with taxes is only one of the many challenges a small business can face. If you’re struggling in any aspect of getting your small business to meet your goals, we can help by providing advice, organizational techniques, motivation and a range of coaching and consulting services. To find out more, contact Coachfirm today for a free consultation.
