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When starting a new company, choosing a business entity is the most important decision that the founders must make. For most businesses with more than one founding member, forming as an LLC is often the best option for a number of reasons.
An LLC is an uncomplicated business structure that affords business owners legal protection by separating personal assets from business debts. Moreover, LLCs often enjoy a lower tax rate than corporations. Nevertheless, creating an LLC can get complicated depending on where you are based, with the formation process, filing fees, and continuing legal obligations differing from state to state.
The process of forming an LLC in New York State involves some unique elements rarely practiced in other states. For one, while in most states an LLC will appoint its own registered agent for service of process, in New York, the Department of State serves as the registered agent for every LLC in the state. The state also imposes additional requirements for an LLC: drafting an operating agreement, optional in most states, is obligatory in New York, as is the publication of a notice of organization in two local newspapers.
To avoid a misstep in the filing process, follow these steps to start an LLC in New York, and refer to the checklist at the bottom of the post to familiarize yourself with the legal and financial requirements for LLCs in the state.
Starting an LLC in New York step-by-step
1. Select a name for your New York LLC
Follow naming requirements
There are 2 major guidelines to follow when naming your LLC in the State of New York:
- An LLC’s name must be distinguishable from the names of existing businesses on file with the New York Department of State Division of Corporations.
- An LLC’s name must contain one of the following phrases or abbreviations: “Limited Liability Company”, “LLC”, or “L.L.C.”
Check the availability of your LLC name
After choosing a name for your LLC, confirm that it is available in New York with a search of the Department of State Corporation & Business Entity Database.
Reserve your LLC name with the Department of State
To prevent another business entity from using your LLC name before you legally organize in the state, its a wise idea to reserve the name with the New York Department of State Division of Corporations.
File an Application for Reservation of Name by mail to reserve the name for up to 60 days. The filing fee for a name reservation is $20. If the initial reservation period is not long enough, you can extend the reservation for two additional periods of 60 days by filing a Request for Extension and paying another $20 fee for each extension.
2. Provide a Mailing Address to the New York Department of State
In nearly every other U.S. state, an LLC must appoint its own registered agent to handle its legal affairs. However, in New York, the Department of State automatically serves as every LLC’s registered agent, accepting legal papers on their behalf and forwarding them to the LLC’s office.
Therefore, an LLC must provide a mailing address to the Department so that any legal papers can be sent its way. Assigning an additional registered agent in the state is optional, but not required.
3. File Articles of Organization
An LLC is legally formed in New York through the filing of Articles of Organization with the New York Department of State Division of Corporations.
The filing can be completed online or through the mail. The filing fee is $200, which can be paid by check, cash, money order, or credit card.
The Articles of Organization must provide the following details:
- LLC’s name
- A New York address where legal documents should be mailed
- New York county where the LLC is based
- LLC organizer signature
- Articles of Organization filer’s name and address
Foreign LLC registration
An LLC formed in a state other than New York intending to do business in the state must register with the New York Department of State Division of Corporations.
Follow these steps to do business in New York as a foreign LLC:
- Comply with New York LLC naming guidelines and confirm that your LLC’s name is available for use in the state using the Division of Corporations Business Search.
- Appoint a New York registered agent.
- File an Application for Authority with the Division of Corporations. The application must be filed online and the filing fee is $250.
- The certificate must be accompanied by either a Certificate of Good Standing or a Certificate of Existence from LLC’s state of origin that is less than a year old.
4. Publish a Notice in Local Newspapers
An LLC is required to publish a copy of its Articles of Organization, or a notice announcing its formation, in two newspapers in the 120 day period following the LLC’s Articles of Organization becoming effective.
The newspapers will issue the LLC affidavits of publication which, along with a Certificate of Publication, must be filed with the New York Department of State. The filing fee is $50.
5. Draft an operating agreement
Unlike in other states, New York law requires an LLC to write and adopt an operating agreement within 90 days of the filing of its Articles of Organization.
The operating agreement should do the following:
- Describe the LLC’s business structure
- Establish the individual responsibilities and obligations of LLC members
- Detail how the LLC will be run
Without an operating agreement clarifying the specific duties of its members, an LLC may face significant legal and operational difficulties.
6. Obtain an IRS Employer Identification Number (EIN)
All newly formed LLCs in the United States must acquire an Employer Identification Number (EIN) from the Internal Revenue Service (with the exception of single-member LLCs).
The nine-digit EIN is like a social security number for a business and is necessary to pay income tax, file tax returns, open business bank accounts, and perform many other important functions.
You can apply for an EIN online on the IRS website without paying a filing fee.
7. Fulfill your New York LLC’s additional legal obligations
Once an LLC is registered, its members must devote attention to fulfilling legal requirements that apply for the duration of the company’s existence.
Pay an annual state filing fee
LLCs active in New York treated as partnerships for income tax purposes must pay an annual filing fee to the New York Department of Taxation and Finance by filing Form IT-204-LL. The fee is based on an LLC’s income and has an upper limit of $400.
LLCs not treated as partnerships for federal income tax purposes are not required to pay an annual filing fee.
File a corporation franchise tax return
An LLC treated as a corporation for income tax purposes could be required to file a corporate franchise tax return with the Department of Taxation and Finance. Visit the Department website for more information.
Obtain business licenses and permits
Some New York LLCs may be required to obtain one or more state or local business licenses, permits, or certifications depending on the nature of their business and their location.
Visit the New York Business Express website for more information on how to obtain necessary state business licenses and permits, and get in touch with a local city or county clerk for guidance on how to satisfy local licensing requirements in your county or municipality.
New York LLC checklist
A New York LLC’s name must obey the following guidelines:
- Must be distinguishable from the names of existing businesses on file with the New York Department of State Division of Corporations.
- Must contain one of the following phrases or abbreviations: “Limited Liability Company”, “LLC”, or “L.L.C.”
Formational documents and filing fees:
- Application for Reservation of Name – $20 filing fee (optional)
- Articles of Organization – $200 filing fee
- Certificate of Publication – $250 filing fee
- Application for Authority – $250 filing fee (foreign LLCs, only)
- An LLC is legally formed in New York through the filing of Articles of Organization with the New York Department of State Division of Corporations. The LLC must then publish either a notice announcing its formation or its Articles of Organization in two local newspapers and submit a Certificate of Publication to the Division of Corporations.
Additional legal obligations:
- Pay an annual state filing fee – Required of LLCs doing business in New York that are treated as partnerships for tax purposes
- File a corporation franchise tax return – Required of certain LLCs doing business in New York that are treated as corporations for tax purposes
- Obtain business licenses and permits – Required of certain LLCs depending on their location and the nature of their business