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What are the advantages of an LLC in New York?
When forming a business in New York, one of the most important decisions is the choice of business structure. If you want to combine the simplicity of a sole proprietorship with the legal protection of a corporation, you can form an LLC (limited liability Company). An LLC can also protect you from legal liability for business debts and obligations, which is why many self-employed individuals and entrepreneurs prefer LLCs.
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Creating an LLC in New York: Admission Requirements
To form an LLC in New York, you must meet one of the following two criteria.
- You, the business owner, must be a resident of New York State, or
- Your registered office must be located in New York State.
In New York State, the New York State Authority sets the requirements for LLCs. However, there are also industry, licensing and land use regulations, many of which are specific to cities and towns.
- For example, the establishment of a daycare center, catering business or home care facility requires specific permits.
- In New York City, even temporary situations or one-time events, such as a grand opening in a public park or neighborhood, require special permission from the city.
To ensure that you can legally create an LLC in New York, you need to learn about the location-specific regulatory requirements and obtain the necessary licenses and permits.
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Creating an LLC in New York
Once you have determined that you are eligible to create an LLC in New York and are aware of the licensing or permit requirements, you can create your LLC (limited liability Company).
Step 1: Decide on the name of your LLC.
The name of your LLC must meet certain government requirements. Pick a name for your business that makes sense.
- You can conduct business under your LLC name.
- Some types of businesses require a DBA (Doing Business As) name, but this is not necessary if you are forming an LLC in New York. If you want to do business under a name other than your legal name, you must file a Certificate of Assigned Name with the New York State Department of State.
In New York State, the LLC name must meet the following requirements.
- It must contain the words “LLC”, “L.L.C.” or “Limited Liability Company”.
- It must not contain any restricted words or phrases (these words are generally only used for certain predefined fields, professions or industries, e.g. “doctor”, “university” or “bank”).
- It must be unique from the names of other LLCs in New York.
This last requirement is perhaps the most difficult to meet: check the New York State Business Entities and Corporations Database, Yelp listings, and the Yellow Pages to see if an LLC name is available. However, to verify if your LLC name is available, you must provide a written statement to the State Department. There is a $5 USD fee for each name you wish to have searched, but the State can confirm if the name you have chosen is available. You can then pay a $20 name reservation fee to reserve the name for up to 60 days.
Step 2: Provide an address to receive official mail.
The New York Secretary of State automatically serves as the registered representative for New York LLC. The registered representative receives official mail and notices of proceedings on behalf of your company and forwards these documents to your company.
You must indicate in your Memorandum of Association where these documents should be sent (usually to your company’s principal address in New York).
- You may choose your business lawyer or another person as your additional registered representative.
Step 3: Filing the Governing Documents
The next step is to prepare and file the governing documents for your LLC. The governing documents make your LLC an independent legal entity. It contains basic information about your LLC, including the name of the corporation, the district in which it is located, the name and address of the registered representative, and the name and address of the nominee. The nominee may be you, another officer, or someone outside the company.
It must be clearly stated in the governing documents whether you are creating a member-managed LLC or an officer-managed LLC.
- In a member-managed LLC, all owners participate in the day-to-day decisions.
- In a manager-managed LLC, the owners choose one or more managers who make the day-to-day decisions. If you are forming an LLC with only one member in New York, such as a professional who is forming an LLC in New York, you do not need to worry about this distinction.
To complete the incorporation document, you can use the two-page form provided by the Department of State or download it and fill it out by hand (use black ink and blank paper to make sure it is accepted by the state registrar). Make sure the LLC name matches the required information exactly; the LLC name must match the names of the other LLCs on the form.
Regardless of how you submit your incorporation document, a one-time, non-refundable filing fee is required, currently $200. If you submit your application online, you will receive an acknowledgment and confirmation email.
Step 4: Apply for a New York Business License
Different states and territories have different requirements for business activity. In New York, there are more than 30 professions that require a state license. These include hairdressers, security guards, medical professionals, home inspectors, and real estate agents. Highly regulated industries such as catering and childcare will likely require special licenses to operate.
Step 5: Publish a public notice of the LLC formation.
New York State law requires that a copy of the governing instrument or notice of formation be published in two newspapers (one daily and one weekly) within 120 days of the LLC’s formation for six consecutive weeks.
- The notice must be published in a newspaper approved by the New York State District in which the LLC is headquartered. Contact the county office to find out which newspapers are available.
- If you choose to publish a notice instead of the governing instrument, make sure that the name of your LLC in the notice is the same as the name on the original governing instrument filed with the Department of State.
- You can contact the newspaper yourself or use an outside company to publish the public notice.
- The newspaper will issue you a publication affidavit and charge you a publication fee. New York newspapers charge high publication fees, so a New York-based company may have to pay several thousand dollars. To save money, you can choose a registered representative outside of New York City and use that address as the office address for your LLC (limited liability Company). You can then place an ad in a newspaper in that district, where the publication fee is lower.
Once you have met the publication requirements, you will need to file a Certificate of Publication with the New York State authorities along with a $50 fee.
If you do not comply with this requirement and do not submit a Certificate of Publication within 120 days, the New York State Department of Commerce will suspend your LLC’s ability to do business.
Step 6: Prepare an LLC Operating Agreement.
According to the New York State Department, LLC members must adopt a written operating agreement before, during, or within 90 days of filing the governing instrument.
While you are not required to file a written operating agreement for your LLC with the State of New York, and state authorities acknowledge that there are no legal consequences for not adopting an operating agreement, it is still advisable to do so in order to establish the foundation for your business.
Corporate agreements typically include the following
- Basic business information: legal name, address and registered representative of the LLC.
- Purpose of the business.
- Business continuity period.
- Tax treatment.
- Information about members, officers, etc.
- Membership dues, including rights and obligations.
- Members’ meetings.
- Voting and approval rights.
- Remuneration of members.
- Right to admit new members and to withdraw membership.
- Provisions for dissolution of the corporation.
You can draft this document using online legal services or working with a business lawyer.
Step 7: Maintaining Your LLC (limited liability Company)
When forming an LLC, the following steps must be followed.
- Open a business bank account
- Apply for a business credit card
- Purchasing small business insurance.
- Choose accounting software.
- Hire employees.
To operate your LLC, you must make a number of commitments. First, you must pay corporate taxes; since an LLC is taxed as a pass-through corporation, the responsibility for paying federal income taxes falls on the LLC owner.
New York State also charges an annual registration fee for most LLCs with more than one member. This fee ranges from $25 to $4,500, depending on your LLC’s revenue. If your LLC has employees, you must also pay federal and state labor taxes. When you sell goods to customers, you must collect and pay sales tax.
New York LLCs must also update their contact information with New York State authorities every two years. A fee of $9 is charged every two years for such an application.
Step 8: Complete federal requirements, including applying for an employer identification number.
You may need to apply for a federal tax identification number, also known as an employer identification number (EIN). You will use your LLC’s EIN when filing corporate tax returns. Also, you may need an EIN if you are opening a business bank account or applying for a business loan. If you are forming an LLC (limited liability Company) in New York and hiring staff, you must apply for an EIN and register with the New York State Department of Labor.
In general, all contractors must apply for an EIN. The only LLCs that are not legally required to apply for a federal EIN are those that have only one member, have no employees, and are not subject to the excise tax. All other LLCs, however, must apply for an EIN from the IRS, which can be done online or by mail.
When applying for an EIN for an LLC, you can decide whether to keep the LLC’s tax status, i.e., tax it as a partnership, or have it taxed as a corporation. Both options have advantages, so it’s ultimately up to you to decide what’s best for your business. To change status, complete Form 8832 and file it with the IRS.
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Conclusion
The formation process is an important step for your business. By LLC formation NYC, you are taking your first step into the world of entrepreneurship. Also keep in mind that you don’t have to go through the process yourself. You can always contact an attorney or an online legal service.
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About Author
Villie Walters Ramirez is a 32-year-old sales assistant at a tax king who enjoys accounting and bookkeeping. She has a post-graduate degree in accounting, and she has a severe phobia of cats. She enjoys travelling a lot.
