Daperis CPANYC Business Taxes Explained: UBT vs. GCT for LLCs and S-Corps
Federal, New York State and NYC income tax. Surely that's all the taxes you pay if you live and work in NYC, right? Most business owners assume that's the whole list, and then they find out the city also taxes the business itself. Business owners already juggle enough responsibilities, and now there's even more taxes? If you haven't run a business in NYC before, this likely catches you off guard.
Which version of that tax you get depends on how your business is structured. Unincorporated businesses, which covers freelancers, sole proprietors, and most LLCs, pay the unincorporated business tax (UBT). S-corps pay the general corporation tax (GCT). Same city, same business, two very different bills and filing requirements.
NYC Has a Few Business Taxes. Here Are the Two We'll Cover.
New York City runs a few separate business tax systems, including UBT, GCT, and the business corporation tax for C corporations. There's also a commercial rent tax for certain Manhattan tenants. This article focuses on UBT and GCT, because those are the two that freelancers, LLC owners, and S-corp owners actually run into. If you're a C corp or a larger Manhattan tenant, that's a different conversation.
While it's true that LLCs and S-Corps are pass-through entities for Federal tax purposes, they aren't necessarily treated that way for NYC tax purposes. Think of this as an additional layer of tax imposed by the city. You have your personal income taxes that you pay, but you also have an additional tax for your business.
UBT: The Tax on Businesses That Aren't Corporations
The unincorporated business tax is a 4% city tax on the profit of a business that isn't a corporation. It applies to sole proprietors, freelancers, single-member LLCs, partnerships, and multi-member LLCs taxed as partnerships. Professions count too. The city's own instructions name law, medicine, dentistry, and architecture, plus any other profession. W-2 employees are out, so if you have a paycheck and a side business, only the side business is in play.
Where does the income count? You'd think it's wherever the client sits. Generally, it's where you do the work. A consultant working from a Brooklyn apartment for clients in California is earning NYC income.
Two features make UBT less scary than it sounds. First, there's a credit that can wipe the tax out entirely at lower profit levels (somewhere around $100,000 of profit, give or take the details), and it fades out as profit climbs. Second, NYC residents can claim a separate credit against their personal NYC income tax (Form IT-219) for part of the UBT they paid. Nonresidents don't get to take this credit.
The catch is the paperwork. If your business's total gross income tops $95,000, you file a UBT return even when the credit brings the tax to zero. That's gross income, not profit, and plenty of people mix those two up. Partnerships and multi-member LLCs file by March 15, while individuals and single-member LLCs file by April 15.
GCT: The Tax on S-Corps
This is where the S-corp pitch gets complicated. New York City has no S-corp election of its own, and it doesn't recognize New York State's either. As far as the city is concerned, your S-corp is just a corporation, and corporations get the general corporation tax. That includes an LLC that elected S-corp treatment.
The rate is 8.85% of the income allocated to NYC, with a few alternative calculations and a minimum tax based on your NYC receipts. The detail that matters most is the base. GCT is charged on profit after the owner's salary comes out. UBT is charged on profit before it. That one difference is why you can't just compare 4% to 8.85% and call it a day.
An S-corp has a different tax return (there are a few different ones to choose from), and an earlier due date than the individual UBT return (March 15 for calendar-year corporations, versus April 15 for individuals).
What That Looks Like in Practice
Say two Brooklyn consultants each clear $300,000 before paying themselves (round number, for illustration). One runs an LLC. The other elected S-corp status and pays herself a $120,000 salary.
The LLC owner pays UBT on a base of roughly $285,000, which comes out to about $11,000. The S-corp owner pays GCT on the roughly $180,000 left after her salary, which comes out to about $16,000. In this example, the S-corp pays more to the city. Whether it still comes out ahead depends on the federal payroll tax savings, QBI deduction and other factors on the other side of the scale. That's the comparison in LLC vs. S Corp and The Hidden NYC Tax on S-Corps.
Real returns have more moving parts, so treat this as the shape of the comparison, not your number.
Filing and Estimated Payments
If your business is simple, your numbers are clean and taxes excite you, filing it yourself is a real option. The hard part is everything that goes into the form, and even working out which return applies to you.
Start with which return you file. Sole proprietors and single-member LLCs use one form, partnerships and multi-member LLCs use another, and S-corps file a corporate return. Changed your entity type midway through the year? You may need to file two returns: a final UBT return for the part of the year before the change, and a GCT return after. Did you work in more than one place last year? You will need to source your income inside and outside of NYC. To make things more complicated, NYC also doesn't follow every federal rule, so your federal numbers don't always carry straight over. UBT and GCT each come with their own estimated payments too, separate from your federal and state ones (the quarterly estimates guide covers the federal side).
So, Which One Applies to You?
If you're a freelancer, a sole proprietor, or an LLC taxed the default way, you're in UBT territory, and the credit may mean you owe little or nothing, though you may still need to file. If you've elected S-corp treatment, you're in GCT territory, and the city taxes you differently than your federal return suggests. If you're somewhere in between, weighing an election or not sure which one you're in, that's the moment to run it against your real numbers before anything gets filed. The city's side of the bill has to be in the math before you file an S-corp election, not after.
Weighing the pros and cons and deciding whether your structure makes sense to begin with, is the part worth having a professional look at.
Keep It Simple / Key Takeaway 🍕
NYC taxes your business separately from you. Freelancers and most LLCs pay UBT, S-corps pay GCT, and the two are built differently enough that you can't swap one for the other and expect the same bill. Working out whether an LLC or an S-corp is the better fit for you in NYC, with the city's tax in the math, is part of the tax planning strategies I walk through with clients.
Primary Sources
The rules behind this article, straight from the source:
- NYC Department of Finance, Unincorporated Business Tax (UBT)
- NYC Department of Finance, 2025 Instructions for Form NYC-202
- NYC Department of Finance, 2025 Instructions for Form NYC-204
- NYC Department of Finance, General Corporation Tax (GCT)
- NYS Department of Taxation and Finance, Instructions for Form IT-219
Disclaimer: This article is for educational and informational purposes only and is not intended as financial, investment, legal, or tax advice. The author assumes no liability whatsoever in connection with its use. This content is not an exhaustive explanation of any topic, practice or process. You should always seek the advice of a licensed professional before making any accounting, tax, financial, investment or legal decision.
Not sure which of these applies to you, or whether your structure is costing you more than it should? Bring me your numbers and I'll walk through it with you.