How Much Does It Cost to Set Up an S Corp in New York?

It's a great time to elect S corporation status in New York State. But before you start the process, it's important to understand the amount of paperwork and the associated costs. New York S corp costs include both one-time formation and ongoing state fees, and your total depends on whether your business is formed as a limited liability company (LLC) or a corporation.

Use this guide to understand how much it will cost to set up your S corp in New York. And if the process or paperwork feels overwhelming once you start, expert support is available to handle it for you. Choosing the optimal structure and understanding costs are among the most impactful financial decisions you can make, and getting them right is important.

Setting Up an S Corp in New York: Cost Breakdown

Prepare to address the fixed and variable costs of starting your S corp in New York.

One-Time Formation Costs

S corp status is a tax election, not a business entity. Forming your LLC or corporation will be your initial cost. While electing S corp tax status is similar regardless of entity type, there can be unique obligations depending on your choice.

Take the newspaper publication requirement. LLCs are subject to this requirement, while corporations are exempt.

Ongoing Annual and Biennial Costs

Once you've successfully elected S corp status in New York, there are ongoing annual and biennial costs you'll be required to pay.

• Biennial Statement: costs $9 and is filed every two years with the New York Department of State.

• New York FDM franchise tax: ranges from $25 to $200,000, based on New York receipts, reported on Form CT-3-S.

An additional 8.85% General Corporation Tax applies to S corp businesses based in New York City. New York introduced an optional Pass-Through Entity Tax (PTET) election in response to the $10,000 state and local tax (SALT) deduction cap created by the Tax Cuts and Jobs Act of 2017. PTET allows S corps to pay New York state taxes at the entity level, which can help shareholders work around the federal SALT deduction cap. While the SALT deduction has been temporarily increased to $40,000, it is scheduled to revert to $10,000 in 2030.

Optional Professional Service Costs

The New York Secretary of State is the default agent for service of process/registered agent for business entities in the state, but you can be your own or use a service. To qualify, they must be 18 or older with a New York address, and must be available during business hours to receive legal notices, tax forms, and state mail on your behalf. Doing it yourself is free, while using a service can cost around $300 per year.

If you use an attorney or a virtual accounting firm, there are fees for formation and ongoing compliance that vary by provider and region.

LLC or Corporation First? How Entity Choice Affects Your S Corp Costs

S corp status is a federal and state tax election layered on top of an existing entity. Because of this, every New York S corp starts as either an LLC or a corporation.

LLCs electing S corp status incur higher upfront formation costs but offer greater management flexibility, whereas corporations have a lower filing fee and no publication requirement.

New York S Corp Compliance Requirements

Businesses may e-file their Biennial Statements. This statement should include:

• The business name and business address of its CEO

• The address of its principal executive office

• The address where the New York Secretary of State will send copies of process accepted on behalf of the corporation

• The number of directors constituting the board and how many directors are women

Pros and Cons of Setting Up an S Corporation in New York

While New York is a clear leader in business and commerce, there are pros and cons of establishing your business as an S corporation in the state. Review the following advantages and drawbacks of operating your business as an S corp in New York.

Advantages of Establishing New York S Corps

Qualified Business Income (QBI) deduction

New York S corp owners can deduct up to 20% of their business income via the QBI tax deduction. Taking every eligible tax deduction will reduce your taxable income and overall tax liability.

Pass-through taxation

Unlike C corporations, which are subject to double taxation, New York S corporations are pass-through entities. Pass-through entities avoid double taxation, with profits passed through to owners and taxed at individual rates.

Writing off losses

S corp business losses can be reported in an owner's personal federal income tax filing.

Payroll and income tax savings

Self-employment tax savings are one of the primary reasons for electing S corp status. Once income reaches a consistent level ($60,000–$80,000 annually), it makes sense for an LLC owner to proceed with the election. They're then able to be paid a "reasonable salary" subject to the 15.3% self-employment tax that funds Social Security and Medicare, and to make distributions that avoid this tax, leading to substantial tax savings.

If you don't have employees, you'll have to set up a payroll system.

Reasonable Salary

While the IRS expects you to pay yourself a reasonable salary, it isn't perfectly defined by the organization. Typically, a safe way to determine a reasonable salary is to compare yourself with other owners in your region and industry.

If the IRS feels your S corp salary is too low, perhaps to dodge payroll taxes, it can reclassify dividends as taxable wages, increasing your tax liability. You may also receive penalties and interest charges in this scenario.

Drawbacks of Establishing New York S Corps

Strict requirements and regulations

Your New York-based S corporation must adhere to certain requirements that other business entities aren't subject to. Requirements include not exceeding 100 members (owners) and only issuing one class of stock.

Possible IRS audits

S corporations operating in New York are more likely to be audited than other business entities when specific red flags occur, such as a low reasonable salary. Accurate and up-to-date books are one of your best defenses if the IRS ever has questions.

More complex bookkeeping and accounting

Paying yourself a reasonable salary while classified as an employee will increase the complexity of your bookkeeping and accounting work. If balancing regional tax matters with your ongoing bookkeeping work becomes complex and time-consuming, it's time to explore full-service bookkeeping support.

Costs without profits

Similar to California's $800 minimum franchise tax, the FDM franchise tax and NYC General Corporation Tax are owed even if your S corp profits are low or you're operating at a loss. This adds to the true cost of maintaining S corp status in New York.

Total Estimated Cost to Set Up an S Corp in New York

These figures exclude optional attorney, virtual accounting, and registered agent fees. The FDM franchise tax varies significantly with New York receipts, ranging from $25 to $200,000.

Get Expert Advice on Setting up a New York S Corporation

1-800Accountant, America's leading virtual accounting firm, helps New York business owners with entity formation, handling tedious S corp election paperwork and complicated forms on your behalf, EIN filing, and registered agent services. We also offer year-round tax advisory support to help your business grow, as well as payroll services for your reasonable salary.

If you're ready to leave New York's tax complexities to the experts, schedule a free consultation to see how state-specific expertise can help your S corp.

New York S Corp FAQ

What is an S Corp?

An S Corp is a special tax election that corporations or LLCs can make with the IRS. This designation allows a business to pass its corporate income, losses, deductions, and credits directly through to its shareholders for federal tax purposes. By utilizing this status, business owners avoid the double taxation commonly experienced by traditional C corporations.

Why should small businesses set up an S Corp?

Small businesses often elect this tax status to reduce their overall self-employment tax burdens. Under this arrangement, active business owners can pay themselves a "reasonable salary" through payroll and receive the remaining profits as distributions. Because distributions are not subject to the 15.3% self-employment tax, this business structure can generate substantial annual savings.

How can you file as an S Corp in New York?

To file as an S Corp in New York, you must first register your underlying business entity by submitting organizational documents. Once your entity is active, you must submit an election form to the IRS to claim your status. New York requires you to file a separate state-level election form to secure pass-through status at the state level.

What are the requirements to meet before filing as an S Corp in New York?

Your small business must meet strict federal eligibility requirements, including being a domestic entity with no more than 100 shareholders. Shareholders must be individuals, certain trusts, or estates who are also citizens or permanent residents of the United States. Unlike C corps, S corps can only issue a single class of stock.

Which forms are necessary to file an S Corp in New York?

You must submit IRS Form 2553 to establish the baseline tax status. To gain recognition from the state, you must then submit Form CT-6 directly to the state tax agency. Each subsequent year, your S corp will file its state franchise return using Form CT-3-S.

How are S Corps taxed in New York?

New York treats S corps as pass-through entities, meaning corporate profits and losses flow directly to shareholders' personal tax returns. However, the state still imposes a mandatory entity-level corporate franchise fee rather than eliminating corporate taxes. If your business operates within New York City, it will be subject to the 8.85% General Corporation Tax.

How much does it cost to maintain an S corp in New York each year?

Every two years, you must submit a mandatory filing statement to the Department of State along with a $9 fee. Additionally, your business must pay an annual state franchise tax that scales based on your local gross receipts. You should budget for ongoing operational overhead, including separate payroll processing fees and virtual accounting expenses.

Do I still have to complete New York's publication requirement if I form a corporation instead of an LLC?

No, that is an exclusive obligation for LLC owners. Traditional corporations are exempt from the expensive newspaper publication rules. Choosing a corporate entity structure allows you to bypass the process of placing consecutive weekly notices in local newspapers.

What is New York's FDM tax?

The FDM tax is a mandatory state franchise fee calculated annually based on your gross New York receipts. It applies to all S corporations and is due even if your business generates no income or reports a net financial loss. You may be required to pay as little as $25 or as much as $200,000.

Is there a fee to file Form 2553 or Form CT-6?

The IRS does not charge a processing fee for submitting Form 2553. Similarly, the New York Department of Taxation and Finance imposes no filing fee when you submit state Form CT-6. Both the federal and state tax election processes are entirely free to establish once your underlying entity has been successfully registered.