S-Corp or LLC in New York City? The usual advice may not apply.
Across most of the US, a profitable LLC often saves tax by electing S-Corp status. Inside the five boroughs, New York City taxes S-Corps as regular corporations, which changes the math.
How the city taxes each structure
| Structure | NYC tax | Rate | Return |
|---|---|---|---|
| Sole proprietor / single-member LLC | Unincorporated Business Tax | 4% | NYC-202 |
| Multi-member LLC / partnership | Unincorporated Business Tax | 4% | NYC-204 |
| S-Corporation | General Corporation Tax | 8.85% | NYC-4S / NYC-3L |
| C-Corporation | Business Corporation Tax | up to 8.85% | NYC-2 |
UBT and GCT figures are the general city rates. Exemptions, credits and allocation outside NYC can lower what you actually pay.
Sources: NYC Finance: Unincorporated Business Tax · NYC Finance: General Corporation Tax instructions (S corporations) · NYSSCPA: New York City taxes primer
What an S election saves and what it costs
The saving: an S-Corp owner pays Social Security and Medicare tax only on a reasonable salary, not on all profit. For a business earning well above a normal salary, that can be a real saving.
The cost in NYC: the S-Corp pays the 8.85% General Corporation Tax at the company level, instead of the 4% UBT an LLC would pay. You also take on payroll, a separate corporate return and higher accounting costs.
Other factors: the federal QBI deduction is now permanent, New York’s pass-through entity tax election can help with the SALT cap, and businesses that work partly outside the city allocate income differently. These change the result from one owner to the next.
That is why we model your actual numbers both ways before recommending anything.
Sources: IRS: Self-employment tax · NY Tax Dept: Pass-through entity tax · Taft Law: One Big Beautiful Bill tax changes (QBI, bonus depreciation)
Frequently asked
Does NYC recognize the S-Corp election?
No. New York City does not recognize the federal or state S election. S-Corporations doing business in NYC pay the General Corporation Tax.
Is my business located outside NYC treated differently?
Yes. A business on Long Island or elsewhere in New York State does not pay the NYC UBT or GCT, so an S election is evaluated differently.
Can I switch from an S-Corp back to an LLC?
Revoking an S election or restructuring is possible but has timing rules and tax effects. Talk to us before you make a change.
Sources: NYC Finance: Unincorporated Business Tax · NYC Finance: General Corporation Tax instructions (S corporations) · NYSSCPA: New York City taxes primer · IRS: Self-employment tax · NY Tax Dept: Pass-through entity tax · Taft Law: One Big Beautiful Bill tax changes (QBI, bonus depreciation)
Figures and rules on this page come from the official and published sources linked above, as of November 2026. People and numbers in the examples are made up to explain the idea. This page is general information, not tax or legal advice for your situation, and laws change; check the linked source or ask a licensed CPA before you act.
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