Is an S-Corp still worth it if I live or work in New York City?
Short answer
Often not in the usual way, because New York City doesn't recognize S-Corp status and taxes the company's city-sourced profit at a corporate rate, which can cancel out the self-employment tax savings.
Otavio Mayole, Co-founder, DeCypher FinancialsUpdated
As an S-Corp in NYC, you can face three layers:
- Federal, where the S-Corp works as usual
- New York State, which recognizes the S-Corp but has its own filing and fee
- New York City, which taxes the company's city profit as if it were a regular corporation
NYC also taxes businesses that aren't incorporated, so staying a sole proprietor doesn't make the city tax disappear.
What we look at with NYC creators:
- Where your income is earned. Business done outside the five boroughs may not be taxed by the city.
- Where your office is. A real office outside NYC can shift where profit is sourced, if the rent is less than the tax it saves.
- Where you live. Staying a resident of another state, if that's genuinely where your life is, changes the picture.
- How long you'll be there. A short stay and a permanent move lead to different answers.
If you move to NYC with an LLC from another state, the LLC usually has to register in New York too.
We model it both ways, with and without the S-Corp, before you decide.