Are you thinking of starting your own business? If so, you might be wondering how to set up your business structure. One popular option in New York is to create a Limited Liability Company (LLC), which can offer several advantages over other business structures.
In this guide, I’ll provide some key benefits and an overview of creating an LLC in New York. So, if you’re ready to start your own business, read on for more information about LLCs in New York.
Related: Starting A Business In New York Checklist
Why choose an LLC?
There are two main reasons a business owner would choose a Limited Liability Company: personal liability protection and the potential to save money on taxes.
Unlike a sole proprietorship or partnership, where the small business owner can be personally liable for lawsuits against the business, the LLC is a separate legal entity that protects the business owner’s assets. So, if the LLC is sued, the owner’s personal assets are usually protected.
Besides liability protection, the Limited Liability Company also provides several other benefits over the New York sole proprietorship, partnership, and corporation because of the multiple tax options, ease of administration, and management flexibility.
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Steps To Form A New York LLC
Step 1: Choose a Name for the LLC
The first step in forming a New York Limited Liability Company is to make sure the name you want is available. This needs to be researched first because the name of each LLC must be distinguishable from other entity names registered in the state of New York. The New York Division of Corporations makes it easy to do a New York LLC name search, so you can quickly verify if your LLC name is available.
In addition to the name being unique, the entity designator (identifier used at the end of the business name) must be either:
- Limited Liability Company
- L.L.C.
- LLC
A comma may be used after the business name and before the designator. “Hudson Heritage Designs LLC” and “Hudson Heritage Designs, LLC” are both acceptable.
If there is a name you want to use but aren’t ready to form the LLC, the Application for Reservation of Name can be filed with the New York Department of State for up to 60 days.
Step 2: Appoint a New York Registered Agent
Every LLC in New York is required to have a registered agent, who is simply someone with a New York street address who will be responsible for any legal correspondence, such as if the business is served papers in the event of a lawsuit.
Many LLC owners are also registered agents for the company, but some hire a registered agent service. Reasons to hire a registered agent service include when the owner lives in another state or prefers that their personal address not be on public record.
Related: How To Appoint A New York Registered Agent
Step 3: File the New York LLC Articles of Organization
The paperwork to officially create an LLC in New York is called the Articles of Organization. To submit the paperwork, file online through the New York Division of Corporation’s website or download and mail the New York LLC Articles of Organization (Form DOS-1336-f).
Related: How To Fill Out The New York Articles Of Organization
When filling out the Articles of Organization, a few sections can be difficult to answer, so I’ll go over a few of these sections that commonly trip up people.
Opening statement: This is an optional section where the filer states, ” THE UNDERSIGNED, being a natural person of at least eighteen (18) years of age, and acting as the organizer of the limited liability company hereby being formed under Section 203 of the Limited Liability Company Law of the State of New York certifies that:”
This says the filer agrees the rest of the information in the Articles of Organization is true.
Purposes: This is an optional statement you can agree to or not that says the LLC is being formed “To engage in any lawful act or activity within the purposes for which limited liability companies may be organized pursuant to Limited Liability Company Law provided that the limited liability company is not formed to engage in any act or activity requiring the consent or approval of any state official, department, board, agency, or other body without such consent or approval first being obtained.”
Check the box if it applies and proceed.
Service of process: In this section, enter the mailing address where the Department of State should send notices of lawsuits.
This address does not have to be in New York, but it does have to be in the continental United States. Some filers use a third-party service company to receive these notices on their behalf. These services must already be registered with the Department of State, and if you select “Select a Service Company,” a drop-down list with approved companies will appear for you to select from.
Most fliers will enter the location information for the LLC.
Related: What is the service of process?
Effective date: The effective date section is optional.
You can choose to elect to have the LLC start immediately upon filing the Articles of Organization (which will happen without doing anything). If you want the LLC to start on a date up to 60 days in the future, select the “Check if Applicable box” and enter a date.
The main reason for delaying the LLC start date is when the filing is being done close to the end of a calendar year, and the business will not have any activity until the start of the following year. By delaying until the following year, one less business tax return needs to be filed.
Dissolution date: This section is optional and allows you to set a date to close the LLC. Most LLCs choose a perpetual existence (which is the default choice); however, some businesses (usually investment-related) will have a specific closure date.
To include this statement in your Articles, select the “Check if Applicable box” and the appropriate information.
Liability statement: This optional statement is an indemnification clause that says, “The limited liability company shall defend, indemnify, and hold harmless all members, managers, and former members and managers of the limited liability company against expenses (including attorney’s fees, judgments, fines, and amounts paid in settlement) incurred in connection with any claims, causes of action, demands, damages, liabilities of the limited liability company, and any pending or threatened action, suit, or proceeding. Such indemnification shall be made to the fullest extent permitted by the laws of the State of New York, provided that such acts or omissions which give rise to the cause of action or proceedings occurred while the Member or Manager was in performance of his or her duties for the limited liability company and was not as a result of his or her fraud, gross negligence, willful misconduct or a wrongful taking. The indemnification provided herein shall inure to the benefit of successors, assigns, heirs, executors, and the administrators of any such person.”
Breaking this down, it says the LLC will protect its members and managers from the business’s operations, provided those members and managers weren’t negligent in their duties, and hold them harmless should there be a lawsuit.
Step 4: New York LLC Publication Requirement
Per Section 206 of the New York LLC Act, after the Articles of Organization are filed, an ad must be published in two local newspapers or printers for six consecutive weeks. To meet the Newspaper Publication Requirement, both papers must be located in the same county as the LLC’s principal office, in addition to being approved by the County Clerk of the county where the primary office of the LLC is located. After the notice has run, the publisher of each newspaper will send a filing receipt for proof of publication (Affidavits of Publication of the Newspapers).
Once the affidavits are sent to you, they will be mailed to the Division of Corporations along with the Certificate of Publication and a $50 filing fee. The Certificate of Publication must be submitted within 120 days of the LLC being formed.
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What To Do After Starting A New York LLC
Once the LLC has been formed, there are a few additional steps to take. Below is a list of the most common tasks.
Prepare a New York LLC Operating Agreement
The LLC operating agreement is a document that governs the framework of an LLC. It covers items like ownership rights, member responsibilities, how profits and losses are distributed, and more.
Most states do not require an LLC to have an operating agreement, but New York LLCs are required to have one. This rule helps make sure that all the members of the LLC understand their rights, responsibilities, and the company’s operational procedures.
The operating agreement is an internal document, meaning you don’t have to file it with the state, but you do need it. This document should be kept where you store your important business records.
Obtain an EIN
If the LLC will hire employees or is owned by more than one member, an EIN is required.
The EIN or Employer Identification Number (also referred to as a Federal Employer Identification Number, FEIN, or Federal Tax ID Number) is a unique 9-digit tax identification number assigned to a business by the Internal Revenue Service (IRS). Like an individual’s social security number, the EIN identifies business entities for tax purposes.
Related: How To Register For An EIN
Open an LLC Bank Account
Opening a bank account for your LLC is important for liability protection as the account separates the business’s funds from the member’s personal funds.
Several documents will be needed to open a business bank account, such as:
- A banking resolution is a document that authorizes the members to open a business bank account on behalf of the LLC.
- Copies of the original formation paperwork from the state showing the official creation of the LLC.
- Driver’s licenses of the members.
- Occasionally, the bank will request a New York Certificate of Good Standing to prove the LLC is active and in good standing with the state.
Apply for Business Licenses and Permits
Depending on what your business does and where it is located, various business licenses and permits will likely be needed before starting your business. Some common registrations include:
- Business license: There isn’t a statewide business license, but many cities require businesses to obtain licensing before they can start.
- Professional license: Certain services, such as barbershops, accountants, salons, and others, must be licensed before being offered in the state.
- Sales Tax Certificate of Authority: The New York Department of Taxation and Finance will require a New York Sales Tax Certificate of Authority to sell products and certain services in New York State.
Related: How To Register A Business In New York
File the New York LLC Biennial Statement
LLCs are required to file a New York LLC Biennial Statement with the New York State Department of State. The statement costs $9 every other year.
File the Beneficial Owner Information Report
Beginning in 2024, any individual who owns at least 25% or has “substantial control” of an LLC or corporation in New York or any other state must file the Beneficial Ownership Information (BOI) form with the Financial Crimes Enforcement Network (FinCEN). BOI reports are filed electronically through FinCEN’s website.
New York LLC FAQs
How much does it cost to set up an LLC in New York?
Setting up a New York LLC includes paying a few different fees.
The initial fee is for filing the Articles of Organization with the New York Division of Corporations, which will cost $200.
Next, a legal notice must be run in two newspapers. The cost of the legal notice will vary by publication.
After the notice has run, a Certificate of Publication and filing fee of $50 must be filed with the New York Division of Corporations within 120 days of the LLC being formed.
Is there a yearly fee for an LLC in New York?
The Biennial Report and $9 state filing fee must be paid every other year.
How long does it take to start an LLC in New York?
LLCs formed online are processed in 7 business days, while mailed-in forms can take 2-4 weeks.
What is a Foreign Limited Liability Company?
A New York foreign LLC isn’t a special type of LLC. Instead, it’s an LLC that was formed in another state but wants to operate physically in New York. Physically operating means having a presence, such as having an office or hiring an employee.
What is a Professional Limited Liability Company?
Businesses that require occupational licensing in New York, such as accountants, architects, veterinarians, etc., will need to file for a Professional Limited Liability Company (PLLC) instead of an LLC. Filing for a PLLC is very similar to filing for an LLC.
What are the publication requirements associated with the formation of an LLC in New York?
After filing the Articles of Organization, a legal notice must be run in two newspapers that are distributed in the county where the LLC is located. The cost of the legal notice will vary by publication.
After the notice has run, a Certificate of Publication, the affidavits of publication from the newspaper, and the filing fee of $50 must be filed with the New York Division of Corporations within 120 days of the LLC being formed.
