Opening an S corp in New York is a two-step process: you first form a business entity with the state, then file separate elections with the IRS and New York to have it taxed as an S corporation. An S corp isn’t its own entity type. It’s a tax classification you apply to either a corporation or an LLC. Most people in New York form a standard business corporation and then elect S corp status, so that’s the path this guide follows.
What an S Corp Actually Is
An S corporation is a regular corporation (or LLC) that has elected pass-through tax treatment. Instead of the company paying corporate income tax on its profits, those profits pass through to the owners’ personal tax returns. Owners who work in the business pay themselves a reasonable salary, and any remaining profit is distributed without being subject to self-employment tax. That split between salary and distributions is the main tax advantage of an S corp.
To qualify, the IRS requires that the corporation have no more than 100 shareholders, all of whom must be U.S. citizens or residents. The company can only issue one class of stock. If you meet those rules, you’re eligible to elect S corp status at the federal level and, separately, in New York.
Form a Corporation With New York State
Your first step is filing a Certificate of Incorporation with the New York Department of State, Division of Corporations. This is the document that legally creates your corporation. You’ll need to include the corporation’s name, its purpose, the county where its office will be located, the number and type of shares the corporation is authorized to issue, and a designated agent for service of process (the person or address where legal documents can be delivered).
The corporation name must include a corporate designator like “Inc.,” “Corp.,” or “Incorporated,” and it cannot be too similar to an existing entity on file with the state. You can check name availability through the Department of State’s online database before filing.
Filing can be done by mail or through the Department of State’s online portal. The state filing fee for a Certificate of Incorporation starts at $125, but it scales up based on the number of shares you authorize. A common approach is to authorize 200 shares of no-par-value stock, which keeps you at the minimum fee. If you authorize shares with a stated par value, the fee is calculated at a rate per share, so higher share counts mean higher fees.
File IRS Form 2553 for Federal S Corp Election
Once your corporation exists, you need to tell the IRS you want S corp tax treatment by filing Form 2553, Election by a Small Business Corporation. Every shareholder must sign this form. For the election to apply to your first tax year, you must file Form 2553 no later than two months and 15 days after the date of incorporation. If you miss that window, the election won’t kick in until the following tax year.
You can file Form 2553 by fax or mail. The IRS will send a determination letter confirming your election, which typically arrives within 60 days. Keep this letter in your permanent records.
File Form CT-6 for the New York S Corp Election
Federal S corp status does not automatically carry over to New York. You must file a separate election with the New York State Department of Taxation and Finance using Form CT-6. This step is easy to overlook, and skipping it means New York will tax your corporation as a C corp at the state level, eliminating your pass-through benefits on your state return.
For a corporation organized in New York that wants S corp status for its first tax year, Form CT-6 must be filed on or before the 15th day of the third month following the effective date of the Certificate of Incorporation. For existing corporations, the election must be filed during the preceding tax year or by the 15th day of the third month of the tax year you want it to apply to. For a calendar-year corporation, that deadline is March 15.
You can fax Form CT-6 to 518-435-8605 or mail it to the NYS Tax Department’s processing center in Albany. Every shareholder with New York income must consent to the election on the form. The postmark date counts as your delivery date, so if you’re mailing close to the deadline, use certified mail for proof.
Obtain Your EIN and Set Up Operations
You’ll need an Employer Identification Number (EIN) from the IRS, which functions as your corporation’s tax ID. You can get one instantly by applying online at IRS.gov. You’ll use this number to open a business bank account, file taxes, and hire employees.
In New York, you’ll also want to register with the Department of Taxation and Finance for any applicable state taxes. If you plan to sell taxable goods or services, you’ll need a Certificate of Authority to collect sales tax. If you’ll have employees, you must register for state withholding tax and unemployment insurance.
Open a dedicated business bank account right away and keep all corporate funds separate from personal accounts. Mixing personal and business finances can jeopardize the liability protection that a corporation provides.
Ongoing Compliance Requirements
New York S corporations file an annual franchise tax return using Form CT-3-S. Even though the income passes through to shareholders, the corporation itself still owes a fixed dollar minimum tax based on its New York receipts. This minimum ranges from a few hundred dollars for small companies up to $4,500 for those with significant New York revenue. One benefit specific to New York S corps: the metropolitan transportation business tax surcharge does not apply to them.
If your corporation reasonably expects to owe more than $1,000 in franchise tax after credits, you’re required to make quarterly estimated tax payments using Form CT-400.
Every two years, you must file a Biennial Statement with the Department of State. The fee is $9. This filing keeps your corporate information current with the state, and failing to file can lead to penalties or dissolution.
You should also maintain standard corporate formalities: hold annual meetings of shareholders and directors, keep minutes, and document major decisions with written resolutions. These practices protect your limited liability status if the corporate structure is ever challenged.
If You’re Starting With an LLC Instead
You can also form an LLC and elect S corp taxation rather than incorporating as a traditional corporation. The process starts with filing Articles of Organization with the Department of State instead of a Certificate of Incorporation. LLCs in New York face one additional requirement that corporations do not: within 120 days of formation, you must publish a notice of the LLC’s formation in two newspapers (one daily, one weekly) in the county where the LLC’s office is located, then file a Certificate of Publication with the state along with a $50 fee.
The newspaper publication costs vary significantly by county, ranging from a few hundred dollars in some areas to over $1,000 in others. If you don’t complete this step within 120 days, your LLC’s authority to conduct business in New York gets suspended.
After forming the LLC, you’d file IRS Form 8832 to elect corporate tax treatment, then file Form 2553 for S corp status at the federal level, and finally file Form CT-6 with New York. This adds an extra filing step compared to starting as a corporation, which is why many people who know they want S corp treatment simply incorporate from the start.
Timeline and Total Costs
Standard processing for a Certificate of Incorporation with the Department of State typically takes a few weeks. Expedited processing is available for an additional fee if you need faster turnaround. The core costs break down roughly as follows:
- Certificate of Incorporation filing fee: $125 minimum (more if authorizing additional shares)
- IRS Form 2553: no fee
- NY Form CT-6: no fee
- Biennial Statement: $9 every two years
- EIN application: free
If you go the LLC route, add the Articles of Organization filing fee ($200), the newspaper publication costs, and the $50 Certificate of Publication fee. Either way, budget for annual franchise tax obligations once the business is operating.