New York is the fourth-largest restaurant state in the country and, by most measures, the most complex state in which to close one. The combination of New York State law, New York City local law, and the New York State Liquor Authority (SLA) creates a compliance environment that catches most owners off guard. Here is what you need to know.
New York State Liquor Authority
Your liquor license is issued by the New York State Liquor Authority. When you close, you must surrender the license by submitting a written notice to the SLA. New York on-premises liquor licenses (OP) are not freely transferable -- they are tied to the specific premises and licensee. However, the license can be transferred as part of a business sale if the buyer applies for a new license at the same location.
New York City liquor licenses have significant value in the secondary market, particularly in Manhattan, Brooklyn, and Queens. A full liquor license in a desirable NYC neighborhood can facilitate a business sale at a premium. Do not surrender without first consulting a licensed SLA attorney or broker.
New York Final Paycheck Law
New York has strict final paycheck requirements under New York Labor Law Section 191. If you terminate employees, final wages are due by the next regular payday. However, New York also requires that you pay out all accrued, unused vacation if your written policy or practice has been to do so. Unlike Texas, New York courts have found that a consistent practice of paying out vacation creates an implied obligation even without a written policy.
New York City adds an additional layer: the NYC Earned Safe and Sick Time Act requires payout of any accrued safe/sick time if your policy provides for it. Review your employee handbook and any NYC-specific policies before the closing date.
New York WARN Act and the NYC WARN Act
New York State has its own WARN Act that is stricter than the federal version. The New York WARN Act (Labor Law Article 25-A) applies to employers with 50 or more full-time employees who lay off 25 or more employees within a 30-day period. Required notice is 90 days -- not 60 days like the federal law.
New York City has an additional local WARN Act administered by the NYC Department of Small Business Services that applies to employers with 50 or more employees. If you operate in New York City and have 50 or more employees, you must comply with both the state and city WARN requirements simultaneously.
Failure to provide the required 90-day notice triggers liability for 90 days of back pay and benefits per affected employee. On a 50-person crew earning an average of $18/hour, that is over $1 million in potential liability.
New York Sales Tax
File a final sales tax return with the New York State Department of Taxation and Finance. New York City adds an additional 4.5% local sales tax on top of the 4% state rate, for a combined rate of 8.875% in NYC. You must remit all sales tax collected through your last day of operation and cancel your Certificate of Authority. The Department of Taxation and Finance will issue a final audit notice.
New York State Corporate Tax
If your restaurant is structured as an LLC or corporation, file a final New York State corporate tax return with the Department of Taxation and Finance. New York City imposes its own General Corporation Tax (GCT) or Unincorporated Business Tax (UBT) depending on your entity structure. File final returns with both the state and the city. Obtain a tax clearance before filing dissolution documents.
New York Secretary of State Dissolution
To dissolve a New York LLC, file Articles of Dissolution with the New York Department of State. For a New York corporation, file a Certificate of Dissolution. New York requires that you publish a notice of dissolution in two newspapers in the county where the business is located for six consecutive weeks -- a requirement that exists almost nowhere else and typically costs $500 to $1,500.
The Lease
New York commercial leases are notoriously aggressive. Personal guarantees in New York City leases are standard and often include Good Guy clauses that limit your liability to rent owed through the date you vacate and surrender the keys -- but only if you give proper advance notice (typically 30 to 90 days). If you have a Good Guy clause, use it correctly. If you do not, your liability extends through the full remaining lease term.
For the full cost picture, see What Does It Actually Cost to Close a Restaurant. For the lease negotiation, How to Walk Away from a Restaurant Lease Without Losing Everything covers the New York-specific dynamics.
The Correct Sequence
Determine WARN Act applicability first -- 90 days of lead time is required if you have 50+ employees. Notify employees, pay final wages by next regular payday, file final sales tax returns (state and city), file final corporate tax returns (state and city), obtain tax clearance, publish dissolution notice, file dissolution with the Secretary of State, and handle the SLA license last.