When starting up a new business, business owners have to choose the type of organization they want to form: sole proprietorship, partnership (Limited Labiality Company (LLC), Limited Partnership (LP) or Limited Liability Partnership (LLP)) and corporation (S-corp. or C- corp.). Different types of organizations have additional tax requirements.
Sole proprietors report their business profits or losses on their federal and New York State personal income tax returns. If they expect to owe New York State, New York City, or Yonkers income tax, they must make estimated tax payments during the year.
A partner reports their partnership income on their income tax return. A partnership that reports its income on Form It-204, Partnership Return, is not subject to paying state income tax. But it has to pay a filing fee and file Form IT-204-LL. An LLC or LLP that has New York source income and is treated as a partnership for federal income tax purposes will be treated as a partnership for New York State tax purposes. Every partnership with income derived from New York sources is subject to pay estimated income tax/MCTMT payments on behalf of its nonresident individuals or corporations.
Sole proprietors and partners with net earnings from self-employment allocated to metropolitan commuter transportation district (MCTD) are subject to the urban commuter transportation mobility tax (MCTMT) unless the total net earnings from self-employment are given to the MCTD are less than $50,000. Besides that, sole proprietors or partners who conduct business in New York City are subject to the New York City unincorporated business tax.
C Corporation reports the corporate income on its corporation franchise tax return, while S Corporation’s income or losses will pass to its shareholder. A domestic corporation (formed under New York State) must file a Certificate of Incorporation with the New York State Department of State. Foreign corporations (formed in another state or foreign country) that want to do business in New York State must be authorized by the New York State Department of State. They both pay franchise tax for each fiscal year, and foreign corporations must pay license and annual maintenance fees. Suppose a corporation (other than a New York S corporation) does business in MCTD. In that case, it must also file and pay a metropolitan transportation business tax surcharge (MTA surcharge) on business done in the MCTD.
The general S corporation may elect for S election for New York State tax purposes by filing Form CT-6, Election by a Federal S Corporation. If the C Corporation makes the election to be a New York State S corporation and the corporation is subject to the franchise, that corporation is subject to the fixed dollar minimum tax determined under Tax Law section 210(1) (d). On the other hand, if the S corporation is subject to the franchise tax on general business corporations where the shareholders have not made the election to be a New Y...
