7 ms·

I tell anyone who will listen: stay as far away from NYC and NYS as you can when you're operating a business. The bureaucracy is insanely complex and both gover

I tell anyone who will listen: stay as far away from NYC and NYS as you can when you're operating a business. The bureaucracy is insanely complex and both governments harbor a very strong anti-business sentiment. NYS charged my previous, 2-person, zero employee agency a $14K fee for not having a Workers Comp policy, even though having one isn't necessary for member-managed businesses. We sent in paperwork demonstrating our case and they didn't care. They kept asking for more proof that we didn't have employees—even though they had no evidence that we did have them. A bit hard to prove a negative! After several years of back and forth, we finally just said forget it, closed that entity, and started ignoring the monthly shakedown notices. Now I'm wary of even having clients in NYS. [Edit: I've heard CA is similar, but don't have personal experience there.]

andrewmcwatters 5y ago
NY and CA make it clear enough to the rest of us by the fees for starting a business, let alone the operating risk.
- seriousquestion 5y ago
  To wit, CA charges $800 PER YEAR to have an LLC. For many small one person LLCs, that $800 a year makes a big difference. $8,000 over a decade.
  - systemvoltage 5y ago
    The argument I hear from folks in CA is that people who own LLCs are already rich and they can afford $800. This is exactly the attitude that makes people move out of CA. It is ridiculous taxation and government fees for pushing papers. It would be far better to let people start companies for free and then pay whatever fees after generating $1M revenue. You know, after they're "Rich". SMH.
    - hogFeast 5y ago
      It also entrenches inequality. Design a system that assumes everyone is rich, poor people can never rise. As someone not from the US, this aspect of the US has always amazed me. There is huge regulation on business at the state-level, particularly SMEs, but the US has a functioning economy somehow...do the rich just incorporate in Delaware? It is amazing to think that the US has succeeded in spite of significant efforts to fail. Introducing flat fees on business creation is tying a noose round your own neck economically.
      - systemvoltage 5y ago
        You cannot look at this myopically - there are many areas of CA's policies, especially in the 1970's through 90's where the "Silicon Valley" name originates from. There is a lot of inertia from policies - like stopping a massive locomotive - and just because the policies are less steamy, it still takes a lot to stop the train. Labor pool has a magnetic catch-22 effect. I've incorporated 2 LLCs in the past (not in CA) and it was literally a 10 minute job. Costs $50 one time fee. No recurring fees at all. Mostly online, albeit have to print out a form and mail it to the Dept of Revenue, but don't need to queue up anywhere. Opening a bank account is straight forward and takes 1 day. There is also a lot of variation from state to state - ironically, the red states have better policies for inequality for businesses. Low regulation in this area helps the "small guy/gal" get their feet wet without much hurdles. I strongly believe in regulation based on thresholds of how large/monopolistic/oligarchic companies get. Regulations should be designed in a way that promotes methodical canopy growth but not completely cover the seedlings that are hatching on the ground.
        andrewmcwatters 5y ago
        That’s not ironic, it’s common knowledge.
    - hguant 5y ago
      It's frustrating seeing the rhetorical tricks people pull - "these regulations exist only hurt/harm the rich!" - when common observation shows that no, they just prevent people from becoming rich. The poor have nothing, the rich have more layers than God, so the middle class gets the shakedown.
  - borski 5y ago
    FWIW, as of 2021, the first year’s franchise tax fee is now free: https://www.llcuniversity.com/california-llc/annual-llc-tax-exemption-ab-85/ https://www.llcuniversity.com/california-llc/annual-llc-tax-... (But I agree with you, and would file an LLC in DE or elsewhere, unless I plan on raising funding in which case it wouldn’t be an LLC but a DE C-Corp)
    - deleted 5y ago
      [deleted]
    - gunapologist99 5y ago
      Wyoming. Low fees, no taxes; it trumps DE in every way except investability (and perhaps the ecosystem, but it's getting there fast)
      - devoutsalsa 5y ago
        Isn’t the main reason people like Delaware because the corporate law is very well understood? There’s case law going back hundreds of years. What does Wyoming offer that trumps that?
        borski 5y ago
        This is correct. That’s why people pick DE.
    - athms 5y ago
      All limited liability entities doing business in California must pay the franchise tax. Also, the first year waiver is only for domestic companies, those organized in California. For a California resident trying to escape the expense, you are going to spend more money by creating your LLC in another state.
      - borski 5y ago
        Good point!
  - deleted 5y ago
    [deleted]
  - ecshafer 5y ago
    Why was this downvoted by people. Seriousquestion raises a good point. $800 a year is a massive cost. Lets say the llc is a cleaning service, and they are only pulling in $20k a year anyways. Operating as an LLC is 1/20th of their income to do it legally. This is a valid point, and is on topic.
    - gnopgnip 5y ago
      It isn't an $800 charge, it is a minimum of $800 in state tax. For an actual business with $20k in revenue the cost is much lower than $800, maybe zero
      - seriousquestion 5y ago
        You would think so, but it is an $800 charge even if you make $0. This yearly tax will be due, even if you are not conducting business, until you cancel your LLC. https://www.ftb.ca.gov/file/business/types/limited-liability-company/index.html https://www.ftb.ca.gov/file/business/types/limited-liability...
      - rewgs 5y ago
        Incorrect. I own a single member LLC in CA and very simply must pay an $800 charge to operate. This is a charge completely separate from taxes owed. I know because for a couple years I didn’t owe any state business taxes and thought I didn’t have to pay the $800. I was wrong and had to back pay those charges plus interest. It sucked.
        aylons 5y ago
        What you say in the second paragraph seems to confirm what the parent comment says.
        _archon_ 5y ago
        It's a fee separate from state business income tax. Possibly deductible, but separate.
  - athms 5y ago
    >...$800 PER YEAR to have an LLC. This franchise tax is required by any type of business entity offering limited liability. Besides a limited liability company, this includes corporations, limited partnerships, and limited liability partnerships. You can avoid this fee if you have a sole proprietorship or general partnership. Additionally, non-profit corporations that have a tax-exemption from the IRS are also exempt from this fee.
- sanedigital 5y ago
  Unfortunately, a lot of first-time entrepreneurs don't know these things and register wherever they live. And even if you register in another state, you still have to abide by NYS/NYC rules if you operate in those regions.
  - andrewmcwatters 5y ago
    Similarly, there’s often little to no benefit to incorporate in Delaware for small businesses, but too many assume it’s a good idea. In fact, for most small businesses, you’re worse off.
    - fridif 5y ago
      And if your business requires a physical presence in NY or CA, such as for a simple plumbing business, it might even be required to form in NY.
Alex3917 5y ago
> even though having one isn't necessary for member-managed businesses Don't you have to waive it in advance though?
- sanedigital 5y ago
  You didn't at the time. The reason we got flagged was because we started talking to insurers about adding a policy at one point in anticipation of hiring.
  - cwkoss 5y ago
    What a racket?! So the insurers send their list of failed leads over to the regulators so they'll get fined?
- vincentsaulys 5y ago
  Somewhat off-topic: do you know of any good resources to read about these sorts of requirements for NYC or the US more broadly? Most sites gloss over these sorts of legal requirements.
seibelj 5y ago
Boston is not much better. I have been trying to get hold of someone to move a bureaucratic process forwards, that only this department can do, for 8 weeks now. Letters, emails, voicemails, nothing can get someone to reply or call me back. Absurd.
- ilamont 5y ago
  City or state government? My least favorite Mass. business experience this year was the complete fuckup with the Dept of Unemployment Assistance solvency fund. My DUA tax rate went from 2.5% to 7.5%. Frigging legislature and state government had no clue that this was coming, and left small businesses like mine swinging in the wind. https://www.masslive.com/politics/2021/04/some-massachusetts-employers-still-face-major-tax-increases-due-to-covid-related-unemployment-claims.html https://www.masslive.com/politics/2021/04/some-massachusetts... But frankly this is nothing compared to doing business with the U.S. government through bids. Never, ever, ever attempting that again.
  - seibelj 5y ago
    Mine is city, section 8 housing. Trying to do a paperwork thing for my tenant and we did everything required on the deadlines but no one has ever contacted us and the new website they created is stuck on “Step 3” of 6 of the process. Not really sure what will happen when the deadline passes, hopefully they will be ok. Just nutty.
  - vincentsaulys 5y ago
    is that 2.5/7.5% rate on the employee's salary or your revenue?
erdos4d 5y ago
I've heard a lot of similar stories about NYC (less for NYS) and I am always wondering what the end game is for these guys. Do you feel like someone was trying to get you to bribe them or something? Absent that, I have a hard time understanding why they would be so persistent in going after you in such a chickenshit fashion.
toss1 5y ago
I heard some years ago from someone who used to work there that Cisco simply refused to bother doing business with New York State - simply would refuse to bid - because they found the entire process to be literally not worth the business. (no other verification, no info on the current status)
borski 5y ago
CA makes mistakes, but not generally very long-term. They’re also quite responsive - I’ve never had a situation in which they didn’t respond, except for the FTB which can take a few weeks or months depending on time of season (similar to the IRS). Every other agency is, well, still a government agency… but tends to be responsive at least.
gamblor956 5y ago
[Edit: I've heard CA is similar, but don't have personal experience there.] Have personal experience with CA. It's not at all the same. NYC is a nightmare to work with, but CA agencies are quite easy to work with. The only other jurisdiction as bad as NYC is the state of Hawaii. Other than during the tax filing season I can reach a live human at a CA agency (except the DMV) within a few minutes just by calling. Representatives are very helpful over the phone, and I've resolved many issues for clients and my employer (now that I'm in-house) just by calling. CA's bureaucracy looks complex, but it's actually very easy to navigate, and if you need help, there are a great many government employees who would be happy to help.
dakial1 5y ago
Complex bureaucracy is not because of anti-business sentiment, it is a business model. This system is kept because it probably sustains a whole economy of intermediaries (either doing legal, grey-area or illegal/bribery work) and the key public machine figures responsible to make it leaner get some benefit out of it.

andrewmcwatters 5y ago

NY and CA make it clear enough to the rest of us by the fees for starting a business, let alone the operating risk.

seriousquestion 5y ago
To wit, CA charges $800 PER YEAR to have an LLC. For many small one person LLCs, that $800 a year makes a big difference. $8,000 over a decade.
- systemvoltage 5y ago
  The argument I hear from folks in CA is that people who own LLCs are already rich and they can afford $800. This is exactly the attitude that makes people move out of CA. It is ridiculous taxation and government fees for pushing papers. It would be far better to let people start companies for free and then pay whatever fees after generating $1M revenue. You know, after they're "Rich". SMH.
  - hogFeast 5y ago
    It also entrenches inequality. Design a system that assumes everyone is rich, poor people can never rise. As someone not from the US, this aspect of the US has always amazed me. There is huge regulation on business at the state-level, particularly SMEs, but the US has a functioning economy somehow...do the rich just incorporate in Delaware? It is amazing to think that the US has succeeded in spite of significant efforts to fail. Introducing flat fees on business creation is tying a noose round your own neck economically.
    - systemvoltage 5y ago
      You cannot look at this myopically - there are many areas of CA's policies, especially in the 1970's through 90's where the "Silicon Valley" name originates from. There is a lot of inertia from policies - like stopping a massive locomotive - and just because the policies are less steamy, it still takes a lot to stop the train. Labor pool has a magnetic catch-22 effect. I've incorporated 2 LLCs in the past (not in CA) and it was literally a 10 minute job. Costs $50 one time fee. No recurring fees at all. Mostly online, albeit have to print out a form and mail it to the Dept of Revenue, but don't need to queue up anywhere. Opening a bank account is straight forward and takes 1 day. There is also a lot of variation from state to state - ironically, the red states have better policies for inequality for businesses. Low regulation in this area helps the "small guy/gal" get their feet wet without much hurdles. I strongly believe in regulation based on thresholds of how large/monopolistic/oligarchic companies get. Regulations should be designed in a way that promotes methodical canopy growth but not completely cover the seedlings that are hatching on the ground.
      - andrewmcwatters 5y ago
        That’s not ironic, it’s common knowledge.
  - hguant 5y ago
    It's frustrating seeing the rhetorical tricks people pull - "these regulations exist only hurt/harm the rich!" - when common observation shows that no, they just prevent people from becoming rich. The poor have nothing, the rich have more layers than God, so the middle class gets the shakedown.
- borski 5y ago
  FWIW, as of 2021, the first year’s franchise tax fee is now free: https://www.llcuniversity.com/california-llc/annual-llc-tax-exemption-ab-85/ https://www.llcuniversity.com/california-llc/annual-llc-tax-... (But I agree with you, and would file an LLC in DE or elsewhere, unless I plan on raising funding in which case it wouldn’t be an LLC but a DE C-Corp)
  - deleted 5y ago
    [deleted]
  - gunapologist99 5y ago
    Wyoming. Low fees, no taxes; it trumps DE in every way except investability (and perhaps the ecosystem, but it's getting there fast)
    - devoutsalsa 5y ago
      Isn’t the main reason people like Delaware because the corporate law is very well understood? There’s case law going back hundreds of years. What does Wyoming offer that trumps that?
      - borski 5y ago
        This is correct. That’s why people pick DE.
  - athms 5y ago
    All limited liability entities doing business in California must pay the franchise tax. Also, the first year waiver is only for domestic companies, those organized in California. For a California resident trying to escape the expense, you are going to spend more money by creating your LLC in another state.
    - borski 5y ago
      Good point!
- deleted 5y ago
  [deleted]
- ecshafer 5y ago
  Why was this downvoted by people. Seriousquestion raises a good point. $800 a year is a massive cost. Lets say the llc is a cleaning service, and they are only pulling in $20k a year anyways. Operating as an LLC is 1/20th of their income to do it legally. This is a valid point, and is on topic.
  - gnopgnip 5y ago
    It isn't an $800 charge, it is a minimum of $800 in state tax. For an actual business with $20k in revenue the cost is much lower than $800, maybe zero
    - seriousquestion 5y ago
      You would think so, but it is an $800 charge even if you make $0. This yearly tax will be due, even if you are not conducting business, until you cancel your LLC. https://www.ftb.ca.gov/file/business/types/limited-liability-company/index.html https://www.ftb.ca.gov/file/business/types/limited-liability...
    - rewgs 5y ago
      Incorrect. I own a single member LLC in CA and very simply must pay an $800 charge to operate. This is a charge completely separate from taxes owed. I know because for a couple years I didn’t owe any state business taxes and thought I didn’t have to pay the $800. I was wrong and had to back pay those charges plus interest. It sucked.
      - aylons 5y ago
        What you say in the second paragraph seems to confirm what the parent comment says.
        _archon_ 5y ago
        It's a fee separate from state business income tax. Possibly deductible, but separate.
- athms 5y ago
  >...$800 PER YEAR to have an LLC. This franchise tax is required by any type of business entity offering limited liability. Besides a limited liability company, this includes corporations, limited partnerships, and limited liability partnerships. You can avoid this fee if you have a sole proprietorship or general partnership. Additionally, non-profit corporations that have a tax-exemption from the IRS are also exempt from this fee.
sanedigital 5y ago
Unfortunately, a lot of first-time entrepreneurs don't know these things and register wherever they live. And even if you register in another state, you still have to abide by NYS/NYC rules if you operate in those regions.
- andrewmcwatters 5y ago
  Similarly, there’s often little to no benefit to incorporate in Delaware for small businesses, but too many assume it’s a good idea. In fact, for most small businesses, you’re worse off.
  - fridif 5y ago
    And if your business requires a physical presence in NY or CA, such as for a simple plumbing business, it might even be required to form in NY.

Alex3917 5y ago

> even though having one isn't necessary for member-managed businesses Don't you have to waive it in advance though?

sanedigital 5y ago
You didn't at the time. The reason we got flagged was because we started talking to insurers about adding a policy at one point in anticipation of hiring.
- cwkoss 5y ago
  What a racket?! So the insurers send their list of failed leads over to the regulators so they'll get fined?
vincentsaulys 5y ago
Somewhat off-topic: do you know of any good resources to read about these sorts of requirements for NYC or the US more broadly? Most sites gloss over these sorts of legal requirements.

seibelj 5y ago

Boston is not much better. I have been trying to get hold of someone to move a bureaucratic process forwards, that only this department can do, for 8 weeks now. Letters, emails, voicemails, nothing can get someone to reply or call me back. Absurd.

ilamont 5y ago
City or state government? My least favorite Mass. business experience this year was the complete fuckup with the Dept of Unemployment Assistance solvency fund. My DUA tax rate went from 2.5% to 7.5%. Frigging legislature and state government had no clue that this was coming, and left small businesses like mine swinging in the wind. https://www.masslive.com/politics/2021/04/some-massachusetts-employers-still-face-major-tax-increases-due-to-covid-related-unemployment-claims.html https://www.masslive.com/politics/2021/04/some-massachusetts... But frankly this is nothing compared to doing business with the U.S. government through bids. Never, ever, ever attempting that again.
- seibelj 5y ago
  Mine is city, section 8 housing. Trying to do a paperwork thing for my tenant and we did everything required on the deadlines but no one has ever contacted us and the new website they created is stuck on “Step 3” of 6 of the process. Not really sure what will happen when the deadline passes, hopefully they will be ok. Just nutty.
- vincentsaulys 5y ago
  is that 2.5/7.5% rate on the employee's salary or your revenue?

erdos4d 5y ago

I've heard a lot of similar stories about NYC (less for NYS) and I am always wondering what the end game is for these guys. Do you feel like someone was trying to get you to bribe them or something? Absent that, I have a hard time understanding why they would be so persistent in going after you in such a chickenshit fashion.

toss1 5y ago

I heard some years ago from someone who used to work there that Cisco simply refused to bother doing business with New York State - simply would refuse to bid - because they found the entire process to be literally not worth the business. (no other verification, no info on the current status)

borski 5y ago

CA makes mistakes, but not generally very long-term. They’re also quite responsive - I’ve never had a situation in which they didn’t respond, except for the FTB which can take a few weeks or months depending on time of season (similar to the IRS). Every other agency is, well, still a government agency… but tends to be responsive at least.

gamblor956 5y ago

[Edit: I've heard CA is similar, but don't have personal experience there.] Have personal experience with CA. It's not at all the same. NYC is a nightmare to work with, but CA agencies are quite easy to work with. The only other jurisdiction as bad as NYC is the state of Hawaii. Other than during the tax filing season I can reach a live human at a CA agency (except the DMV) within a few minutes just by calling. Representatives are very helpful over the phone, and I've resolved many issues for clients and my employer (now that I'm in-house) just by calling. CA's bureaucracy looks complex, but it's actually very easy to navigate, and if you need help, there are a great many government employees who would be happy to help.

dakial1 5y ago

Complex bureaucracy is not because of anti-business sentiment, it is a business model. This system is kept because it probably sustains a whole economy of intermediaries (either doing legal, grey-area or illegal/bribery work) and the key public machine figures responsible to make it leaner get some benefit out of it.