Are you about starting a business in New York and want to form an LLC? If YES, here is the legal requirement to start an LLC in New York and how much it cost. New York is a fantastic place to start and run the company. Known for its rich cultures, diverse cities and a very vibrant economy, New York State remains a centre of opportunity.
Also, the State is the fourth most populous state in the united states, with very strong industries in the technology, finance, investment, media, entertainment and tourism sectors. When planning to start your own business in New York, one of the best ways to do so is to form a New York LLC.
Why Form an LLC in New York?
Forming a New York LLCs will provide you with many protections and benefits enjoyed by larger corporations without all the rules, regulations and compliance issues common to larger business entities. Although an LLC is not a partnership or corporation, establishing an LLC in New York allows you to enjoy the flexibility of a partnership while enjoying the same protections of a corporation.
An LLC is not a corporation, therefore, LLCs are not expected to keep formal minutes or hold meetings. Rather, an LLC runs more like a partnership— with pass-through taxation and management flexibility. Your business can avoid double taxation (that is paying corporate tax and individual tax).
It’s important to point out that a New York LLC also enjoys flexibility at the management level. An LLC can have many members or as little as one member. LLCs are expected to have an operating agreement which sets forth ownership, profit sharing, responsibilities and how the company is to be managed.
Another benefit of forming a New York LLC is that the LLC shields owners and members from personal liability. An LLC is a separate entity, just like a corporation, which means LLC members are personally protected from liability and judgments against the LLC. Other benefits include the credibility of having LLC after your company name, the ability to deduct health insurance premiums and flexible profit distribution.
Meanwhile, although forming an LLC has many benefits, there are also some disadvantages to take into consideration, such as limited life span, going public and added complexity. Starting and running a Limited Liability Company (LLC) in New York City is an exciting business move.
New York is home to some of the most creative, inspiring, and fast-growing businesses in the world, but before you can start selling your products or services, you need to deal with the logistics of setting up your LLC business entity. Just like other states in the United States, New York has its own specific requirements for forming an LLC. If you follow the rules, you stand to gain some great benefit. Below is detailed guide to Form an LLC in New York.
A Detailed Guide to Starting an LLC in New York and the Cost
- Choose a Name
Before you can form your LLC in New York, you will need to choose an available name for your business. Think of something that is catchy, but also explains your business well. Your LLC’s name should be distinct from the names of other LLCs that operate in New York. You can check whether a business name is available by reviewing the state’s Corporation and Business Entity Database, Yelp listings, and the yellow pages.
However, the only way to confirm the availability of a business name is by submitting a written request to the Department of State. To get an official determination of whether your desired name/s is/are available, you will need to send a written notice to the Department of State, Division of Corporations, One Commerce Plaza, 99 Washington Avenue, Albany, NY 12231.
In the letter, you should state clearly that you want to find out whether or not a certain name is available. Include the name/s in the letter.
They charge a search fee $5 for each name submitted. If your chosen name is available, you can reserve it for up to 60 days by paying a $20 name reservation fee. If you receive a response stating that your desired name is available, it’s advisable you make a copy of this response. Even though it is not mandatory, it is good to include a copy of this response when you file for your LLC.
- Appoint a Registered Agent
Every business that operates in New York must appoint a registered agent who has a physical address in New York (no P.O. boxes) and is available during regular business hours. The registered agent’s job is to accept official mail and service of process on your business’s behalf.
Choosing a registered and experienced agent is essential to the success of your company formation. For instance, New York requires newly formed LLCs to publish a notice of formation in local newspapers. Publication costs around $1,500 or more if the principal address is in New York City.
A registered agent service located outside the city allows an LLC to use the registered agent’s address as the principal address which greatly reduces the cost of publication. Also New York’s LLC publication requirements expect that your principal LLC address be publicly shared.
Hiring a professional registered agent service will allow you to use their address instead of yours which will protect your privacy. After the publishing requirements are met, you can change the location of your principal office to anywhere in New York State.
You will not need to publish additional notices. It’s very much advisable that you hire an agent, but note that if you do not designate someone, the New York Secretary of State acts as your registered agent by default. You can choose a business lawyer to be your company’s registered agent, or you can choose an online legal service.
- File your Articles of Organization
For you to file for your LLC, you will need to provide information about your business. This information may include the name of your organization, the county where the LLC will be located, an address of your registered agent, as well as information about the person submitting the articles.
To make everything simpler, the New York Department of State has created a form to file articles of organization. After filling the form, you will need to mail the articles of organization, along with the response letter from the name search (not required, but recommended), and a $200 filing fee.
The address where you should mail the form is: New York State Department of State, Division of Corporations, State Records and Uniform Commercial Code, One Commerce Plaza, 99 Washington Avenue, Albany, New York 12231. Have it in mind that the filing fee can be paid with cash, check, money orders, or credit cards.
Checks and money orders should be made out to: “Department of State”. If you want to pay in cash, you must bring the form to the Department of State office, if you want to pay with credit card, you must fill out the Credit/Debit Authorization Form, print it, and send it with the articles of organization.
You may also fax the forms to: (518) 474-1418. Note that the Department of State will provide you with a receipt stating the name of the business, the date it was filed, the information provided in the Articles of Organization, as well as an invoice for fees paid.
Try not to lose this! They will not issue another one if it is lost. The receipt will be mailed to you via first class mail using the United States Postal Service. However, to be on the safe side, you can also include a prepaid shipping label with your initial forms, if you prefer overnight delivery.
- Publish Notice of LLC Formation
For your LLC setup to be complete, you are expected to publish a copy of your articles of organization in one daily and one weekly print newspaper for six consecutive weeks, within 120 days of the formation of your LLC. But instead of the articles of organization, you can choose to publish a notice announcing the formation of your LLC. You can meet newspapers on your own or hire a third-party service to take care of the publication requirement for you.
Have it in mind that once you fulfil the publication requirement, you are expected to submit a Certificate of Publication, along with a $50 filing fee, to the New York Department of State. Back in the day, newspapers were the only reliable way to notify the public that a new business had been formed. New York, Arizona, and Nebraska are the only three states that still hold onto this requirement, but failure to comply will result in the suspension of your LLC.
Although the publication requirement states that you have to publish notice of your LLC’s formation in two newspapers (one daily and one weekly) that run in the county where your LLC’s office is located, there are no court rulings or decisions that have specifically defined what an LLC’s “office” means for publication purposes.
If your LLC’s office is located in New York City, it simply means that your LLC notice must be published in a daily and weekly NYC newspaper. But, because of the exorbitant publishing rates for NYC newspapers, it could easily cost you several thousand dollars to meet this requirement.
However, if you choose a registered agent outside of NYC, you can use the registered agent’s address as the office address of your LLC. This means you can avoid the prohibitively expensive NYC newspapers while still meeting your publishing requirement. This little tip can end up saving you thousands of dollars which you can channel to other things.
- Create an Operating Agreement
Unlike most states in the United States, New York’s LLC law mandates LLC members to adopt a written operating agreement. The Operating Agreement may be entered into before, at the time of, or within 90 days after filing the Articles of Organization. Note that the Operating Agreement is the primary document that creates the rights, powers, duties, liabilities, and obligations of the members among themselves and to the LLC.
The Operating Agreement is purely an internal document and is not filed with the Department of State. There is a lot of information to cover in your agreement. In order for New York courts to respect your LLC’s rights, you must have this document. Some of the main things you should include are:
- Management of the LLC. A clear outline of how and who will be managing the LLC.
- How decisions will be made in the LLC (e.g. voting powers).
- Allocation of profit as well as losses. It should be clear how profit and losses will be distributed and taken from members of the LLC.
- Governance rules. For example, when meetings will be held, how voting will commence, etc.
- Buy-outs, selling, etc. A clear outline of how a person can leave the company if he wishes to, or is no longer able to function in the company (e.g. through death or disablement.)
- Percentage of ownership. Although this depends on whether there is only one owner or many. However, it should be clearly stated what percentage of the company is owned by whom.
- Responsibilities and rights of each member of the LLC.
- Obtain an Employer Identification Number
The Employer Identification Number (EIN), or Federal Tax Identification Number is used to identify a business entity. It is essentially a social security number for the company. An EIN is also necessary when opening a business bank account or applying for business loans.
The only LLCs that don’t need a federal EIN are single-member LLCs with no employees and no excise tax duties. All other LLCs need to apply for an EIN with the IRS. Once you get your EIN, businesses with employees must also register with the NY Department of Labour.
To set up your LLC in New York, you’re expected to follow the rules of the New York Department of State. Once you set up your LLC in New York, you’ll need to keep track of a few things each year to keep your LLC active. Most LLCs pass-through entities fall on the LLC owners. Individual LLC owners in New York do not pay state income taxes, but New York assesses an annual filing fee on most single-member LLCs and multi-member LLCs.
The annual fee ranges from $25 to $4,500. The exact amount depends on your income from the LLC. You’ll also need to pay federal and state payroll taxes if you have employees. And if your LLC sells goods to customers in New York, you’ll have to collect and remit sales tax.
Also, although there are many licensing requirements and other restrictions surrounding starting a business in New York. The biggest stumbling block is the publication requirement, which can get expensive. Don’t let the setup process and publication requirement deter you from taking this vital step to protect yourself and your personal assets.