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When you’re starting a business in NY, one of the most important decisions you’ll need to make is what entity structure your business will have. There are benefits and drawbacks to the various business entity types, however, if you’re looking for the simplicity of a sole proprietorship with the legal protections of a corporation, you may decide to form an LLC. By starting an LLC, or a limited liability company, you’ll protect yourself from legal exposure for the business’s debt and obligations—making this a preferred entity type for many freelancers and startups.
All of this being said, in order to form an LLC, you’ll have to follow specific requirements based on your business’s location. In this guide, therefore, we’ll be explaining how to form an LLC in NY state, as well as in NYC. Although the process may seem daunting at first, there are actually seven simple steps you can follow in order to start an LLC in NY in no time.
In order to determine how to form an LLC in NY, the first point we’ll want to discuss is who can form an LLC in NY.
The eligibility requirements for LLCs (or any business entity, for that matter) in NY are determined by the New York Department of State. These requirements, therefore, apply to all LLCs within the state, regardless of specific location—meaning the rules are the same whether you’re starting an LLC in NYC or in Albany.
According to the Department of State, then, you only need to meet one of two qualifications if you’re creating an LLC in NY:
If you meet either of these requirements, you can continue with the process to start your LLC in NY.
Before we break down our seven-step guide on how to form an LLC in NY, there are a few other requirements you’ll need to consider. Although the general process of starting an LLC in NY is the same whether you’re forming it in NYC or another city, there will be industry, licensing, and zoning rules that you’ll need to abide by in order to operate legally—many of which will be 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 NYC in particular, even temporary situations or one-time events, such as a grand opening in a public park or on a city block, will require express permission from the city.
Therefore, you’ll want to research these types of location-specific requirements and receive any necessary business licenses and permits so that you can legally start your LLC in NY. For guidance on these legal obligations, you’ll want to consult any business resources your city offers. With regard to NYC, for example, you can utilize their step-by-step online business wizard to determine exactly what you need to do to legally start your business in the city.
Photo credit: NYC.gov
Once you’ve determined that you’re eligible to form an LLC in NY and you’ve sorted through any additional licensing or permit requirements, you’ll be ready to actually get started creating your LLC.
As we mentioned above, because the process of starting an LLC in NY is designated by the state, the steps will be the same whether you’re in NYC, Buffalo, Albany, or any other city.
This being said then, let’s break down the seven steps you can follow in order to form an LLC in NY.
The first step you’ll need to complete in order to form an LLC in NY is to choose a business name. Although this step may seem inconsequential, the name that you choose for your LLC actually has to meet certain guidelines as specified by the state. Of course, you’ll also want to choose a name that makes sense for your business.
In the same regard, it’s also important to note that with the LLC name you choose, you’ll be able to conduct your business activities under that name. Whereas some business entity types require a DBA or “doing business as” name, you will not need this when you’re creating an LLC in NY. 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 NY Department of State.
With this in mind, in NY state, your LLC name needs to meet these guidelines:
The last requirement is perhaps the most important because it is the most difficult to follow. The name of the LLC you’re forming must be different from the names of all other LLCs that operate in New York. In order to check whether an LLC name is available, you can review the NY state Corporation and Business Entity Database, Yelp listings, and the yellow pages.
This being said, however, the only way to confirm the availability of an LLC name before going through the entire application is to submit a written request to the Department of State. If you submit this request, you’ll have to pay a $5 fee for each name you’d like to have searched. Through this process, if the state confirms that your chosen name is available, you then have the option to reserve it for up to 60 days by paying a $20 name reservation fee.
The next step to set up an LLC in NY is to designate a registered agent for your business. Your registered agent needs to be someone who has a physical address in NY (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.
All businesses who operate in NY must have a registered agent, and if you do not specify one for your LLC, the New York Secretary of State will act as your registered agent by default. This being said, you might choose your business lawyer to be your registered agent, or you might choose an online legal service like IncFile or LegalZoom (either of which can also help with creating an LLC in NY).
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Once you’ve decided on who will serve as the registered agent for your business, you’ll need to create and file your LLCs articles of organization.
The articles of organization is the document that establishes your LLC as a separate legal entity. Your articles of organization will include basic information about your LLC including the name of the business, the county it’s located 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.
Within your articles of organization, you’ll also 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, whereas in a manager-managed LLC, owners select one or more managers to make daily decisions. If you have a single-member LLC in NY—like, if you’re a freelancer creating an LLC in NY—you won’t have to worry about this distinction.
To complete the articles of organization in order to set up your LLC in NY, you can use the fillable two-page document available from the Department of State or you can download the document and complete it by hand.
It’s important to note if you are planning to print your articles of organization or fill them out by hand, you’ll want to be sure to use black ink and clean white paper so that they’ll be accepted by the State’s recording technology after you file. Additionally, regardless of how you complete the document, you’ll want to be sure that your LLC’s name is listed exactly the same way in all of the required places on your articles of organization.
Moreover, whether you file your articles of organization in-person, by mail, by fax, or online, you’ll need to pay the one-time nonrefundable filing fee, which is currently $200. If you file online, you’ll receive your filing receipt and acknowledgment copy instantly by email.
After you file your articles of organization, the next step required to start an LLC in NY is to publish a notice of your LLC formation.
As specified by NY state law, you’ll need to publish a copy of your articles of organization or a notice related to your LLC formation in two newspapers, one daily and one weekly, for six consecutive weeks—within 120 days after your LLC formation.
Additionally, you must publish your notice in newspapers approved by the NY county where your LLC is located—to find out what newspapers are acceptable for your county, you can contact your county clerk. Moreover, if you choose to publish a notice instead of your articles of organization, it’s important that the name of the LLC in the notice matches the Department of State’s records as set forth in your initial articles of organization.
This being said, to get your notice published, you can contact the appropriate newspapers yourself or hire a third-party service to handle this requirement on your behalf. The newspapers who publish your notice will provide you with an affidavit of publication—they’ll also charge a publication fee.
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.
Although this may seem like an antiquated requirement—currently only in practice by New York, Arizona, and Nebraska—you’ll still need to adhere to the law. If you fail to complete this requirement and submit the Certificate of Publication within the 120-day timeframe, the NY State Department will suspend your LLC’s ability to conduct business.
As we mentioned earlier, the process to form an LLC in NYC is identical to the process to form an LLC in any other part of the state. This being said, however, when it comes to completing the publication requirement, your NYC-based business could have to pay several thousand dollars due to the steep publishing rates for NYC newspapers.
Therefore, to save your business from this expense, you might decide to choose a registered agent outside of NYC, so that you can use their address as the office address of your LLC. Currently, there are no court rulings or decisions that have specifically defined what an LLC’s “office” means for publication purposes.
So, if your LLC’s address office is listed in a county outside of NYC, you’ll be able to run your publication notice in a newspaper in that county, which will likely have much lower publishing rates.
Technically, at this point, you’ve succeeded in creating an LLC in NY. However, even though your LLC is set up, there are still a few final steps to complete.
Next, you’ll need to create and adopt an operating agreement for your LLC. According to the NY Department of State, the members of an LLC are required to adopt a written Operating Agreement, which should be entered into before, at the time of, or within 90 days after the filing of your articles of organization.
Although you do not need to file your LLC operating agreement with NY state and—as the State Department admits—the law does not indicate consequences for not adopting an operating agreement, you’ll still want to create one to form the backbone of your business.
Generally, then, an operating agreement will include the following:
To create this document, you might choose to utilize an online legal service or work with a business attorney.
Once you’ve developed a written operating agreement, you’ll want to finish setting up your LLC by obtaining a federal tax ID, also called an employer identification number (EIN). You’ll use your LLCs EIN when completing your business taxes—sometimes, an EIN is also necessary when opening a business bank account or applying for business loans.
Typically, it’s recommended that all business owners get an EIN, however, 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 may then decide if you would prefer 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 certain benefits associated with either option, so ultimately, it’s up to you to determine what will work best for your business. However, if you do decide to change your status, you’ll have to complete and file Form 8832 with the IRS.
Moreover, it’s important to remember that if you’re starting an LLC in NY with employees, you’re required to get an EIN and register with the NY Department of Labor.
After you’ve received your EIN, you’ve completed all of the legal steps necessary to form an LLC in NY. At this point, then, you’ll want to start operating your business and fulfilling the requirements necessary to keep your LLC active.
To start running your LLC, you might consider the following next steps:
You’ll also want to remember that there a few obligations you’ll need to manage on an annual basis to keep your LLC running. First, you’ll need to pay any business taxes. As we mentioned above, unless you file for a change of tax status, LLCs are taxed as pass-through entities—meaning the responsibility for paying federal income taxes falls on the LLC owners.
This being said, individual LLC owners in NY do not pay state income taxes, however, NY state does assess an annual filing fee on most single-member and multi-member LLCs. The annual fee for this filing ranges from $25 to $4,500 depending on the income from your LLC. If your LLC has employees, you’ll also need to pay federal and state employment taxes and if you sell goods to customers, you’ll have to collect and remit sales taxes.
Moreover, it’s important to note that LLCs in NY are required to file a biennial statement to update their contact information every two years with the New York Department of State. This biennial statement will require a $9 filing fee.
There you have it—a step-by-step guide on how to form an LLC in NY state. Although you’ll need to pay close attention to the licensing requirements and other restrictions involved with starting a business in your specific municipality, starting an LLC in NY is not too complex of a process.
As we explained, of all the steps you need to complete to set up an LLC in NY, perhaps the most cumbersome is the publication requirement—especially when you’re forming an LLC in NYC. This being said, however, with a little bit of planning, even this requirement can be handled fairly easily.
Therefore, as a recap, if you’re wondering how to create an LLC in NY or NYC, you can follow these steps:
At the end of the day, don’t let the setup process deter you from taking this vital step for your business—by starting an LLC in NY, you’ll be taking the first leap into the world of entrepreneurship and achieving your business goals. 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.