How to Form a Limited Liability Company (LLC) in New York
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To form an LLC, you have to follow specific requirements based on your business's location. This guide explains how to create an LLC in New York.
What are the benefits of an LLC in NY?
When you're starting a business, one important decision is choosing an entity structure. You may decide to form an LLC, or limited liability company, if you want the simplicity of a sole proprietorship with the legal protections of a corporation. An LLC can also protect you from legal exposure to the business's debt and obligations, which is why many freelancers and startups prefer the LLC.
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Creating an LLC in New York: Eligibility requirements
You need to meet one of two qualifications to create an LLC in New York:
You, the business owner, is a New York State resident, or
The business is located in New York state.
The New York Department of State sets the eligibility requirements for LLCs in the state of New York. But there are also industry, licensing and zoning rules to follow, many of which are specific to your city or municipality.
For example, starting a daycare, a food service establishment, or a home-based business all require special permits.
In New York City, even temporary situations or one-time events, such as a grand opening in a public park or on a city block, require express permission from the city.
Research the rules for location-specific requirements and get the necessary licenses and permits so you can legally start your LLC in NY. For guidance on legal obligations, consult the business resources your city offers. In New York City, you can use the step-by-step online business wizard to determine exactly how to start a business in the city.
How to create an LLC in New York: 8 Steps
Once you've determined that you're eligible to form an LLC in New York and you've sorted through the licensing or permit requirements, you'll be ready to create your LLC.
Step 1: Choose a name for your LLC
The name of your LLC has to meet certain state guidelines. Choose a name that makes sense for your business.
You can do business under the name of your LLC.
Some business entity types require a DBA or "doing business as" name, but you will not need this when you're creating an LLC in New York. In fact, if you do decide that you'd like to operate under a name that's different from your legal name, you'll need to file a Certificate of Assumed Name with the New York Department of State.
Your LLC name needs to meet these guidelines:
Must contain the words “LLC," "L.L.C.," or “Limited Liability Company.”
Must not contain these restricted words or phrases (these words, like "doctor," "college," and "bank" are mostly set aside for certain sectors, professions, or industries with pre-designations).
Must be unique from the names of other LLCs in New York.
This last requirement is perhaps the most difficult to follow. To check whether an LLC name is available, review the state's Corporation and Business Entity Database, Yelp listings and the yellow pages. However, the only way to confirm the availability of an LLC name is to submit a written request to the Department of State. You'll have to pay a $5 fee for each name you'd like them to research, but the state can confirm whether your chosen name is available. You can then reserve it for up to 60 days by paying a $20 name reservation fee.
Step 2: Provide an address for receiving official mail
The New York Secretary of State automatically serves as the registered agent for New York LLCs. The registered agent accepts official mail and service of process on your business's behalf, and it forwards those documents to you.
In your articles of organization, you'll need to specify where you'd like those documents sent (typically your business's principal address in New York).
You can choose your business lawyer or another individual to act as an additional registered agent.
You can also opt for an online legal service, such as IncFile or LegalZoom, to help with your LLC registration.
Step 3: File your articles of organization
Next you'll need to create and file your LLCs articles of organization. Your articles of organization document establishes your LLC as a separate legal entity. It includes basic information about your LLC, including the name of the business, the county it's in, your registered agent's name and address, and the filer's name and address. The filer can be you, another business owner or even someone from outside the business.
In your articles of organization, you'll need to indicate whether you're starting a member-managed LLC or a manager-managed LLC.
In a member-managed LLC, all owners participate in the business's day-to-day decisions.
In a manager-managed LLC, owners select one or more managers to make daily decisions. If you have a single-member LLC — like, if you're a freelancer creating an LLC — you won't have to worry about this distinction.
You can use the fillable document from the Department of State to complete the articles of organization, or you can download and complete it by hand (use black ink and clean white paper so the State's recording technology will accept it). Be sure your LLC's name is exactly the same in all the required places.
Regardless of how you file your articles of organization, you'll need to pay the one-time nonrefundable filing fee, which is currently $200. If you file online, you'll receive your receipt and acknowledgment via email.
Step 4: Obtain the proper New York business permits
Every state and locality has different requirements for operating businesses. In New York, over 30 professions require a license from the state. Examples include barbers, security guards, healthcare professionals, home inspectors and real estate brokers. If your business is in a highly regulated industry, such as food service or childcare, you'll likely need a special permit to operate.
New York State's Business Express Wizard can help identify the licensing regulations for your business. You can also contact your city, borough or county licensing agency to learn more.
Step 5: Publish notice of LLC formation
New York state law requires you to publish a copy of your articles of organization or a notice of your LLC formation in two newspapers (one daily and one weekly) for six consecutive weeks within 120 days of your LLC formation.
You have to publish your notice in newspapers approved by the county where your LLC is located. To find out which newspapers are acceptable, contact your county clerk.
If you choose to publish a notice instead of your articles of organization, be sure the LLC name in the notice matches the Department of State's records as set forth in your initial articles of organization.
To get your notice published, contact the newspapers yourself or hire a third-party service to handle it for you.
The newspapers will provide you with an affidavit of publication, and they'll also charge a publication fee. New York City-based business may have to pay several thousand dollars due to steep publishing rates for New York City newspapers. To save money, you might choose a registered agent outside New York City so you can use that address as your LLC's office address. That way you could run your publication notice in a newspaper in that county, which likely has lower publishing rates.
Once you've fulfilled the publication requirement, you'll need to submit a Certificate of Publication, along with a $50 filing fee, to the New York Department of State.
If you fail to complete this requirement and submit the Certificate of Publication within the 120-day timeframe, the State Department will suspend your LLC's ability to conduct business.
Step 6: Create an LLC operating agreement
The members of an LLC have to to adopt a written Operating Agreement before, at the time of, or within 90 days after filing your articles of organization.
Although you don't need to file your LLC operating agreement with NY state and — as the State Department admits — the law doesn't indicate consequences for not adopting an operating agreement, you'll still want to create one to form the backbone of your business.
Generally, an operating agreement includes the following:
Basic company information: legal name of the LLC, address, registered agent.
Duration of the business.
Member and manager information.
Member contributions including rights and responsibilities.
Voting and approval rights.
New members and exit rights.
Rules for company dissolution.
To create this document, you might use an online legal service or work with a business attorney.
Step 7: Keep your LLC active
To start running your LLC, consider the following next steps:
There a few obligations to manage to keep your LLC running. First, you'll need to pay business taxes. LLCs are taxed as pass-through entities, meaning the responsibility for paying federal income taxes falls on the LLC owners.
New York state also assesses an annual filing fee on most single-member and multi-member LLCs. The fee ranges from $25 to $4,500 depending on your LLC's income. If your LLC has employees, you'll also need to pay federal and state employment taxes. If you sell goods to customers, you'll have to collect and remit sales taxes.
LLCs in NY also have to update their contact information every two years with the New York Department of State. This biennial statement has a $9 filing fee.
Step 8: Comply With federal requirements, such as obtaining an employer identification number
You may need to obtain a federal tax ID, also called an employer identification number (EIN). You'll use your LLC's EIN when filing your business taxes—sometimes, an EIN is also necessary when opening a business bank account or applying for business loans. If you're starting an LLC with employees, you're required to get an EIN and register with the New York Department of Labor.
Typically, all business owners should get an EIN; the only LLCs that don't legally require a federal EIN are single-member LLCs with no employees and no excise tax duties. All other LLCs, though, do need to apply for an EIN with the IRS, which can be done online or by mail.
When you receive your LLCs EIN, you can decide to keep your tax status as an LLC, meaning you're subject to pass-through taxation, like a partnership, or if you'd prefer to have your LLC taxed as a corporation. There are benefits with either option, so ultimately you have to determine what will work best for your business. If you decide to change your status, complete and file Form 8832 with the IRS.
The bottom line
Don't let the setup process deter you from taking this vital step for your New York business. By creating an LLC, you'll take the first leap into the world of entrepreneurship. Plus, remember that you don't have to complete this process on your own. You can always consult an attorney or online legal service for assistance.
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This article originally appeared on Fundera, a subsidiary of NerdWallet.