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Setting up a limited liability company (LLC) in New York City is an exciting business move. New York is home to some of the most creative, inspiring, and fast-growing businesses in the world. But before you can start selling your products or services, you need to deal with the logistics of setting up your LLC business entity.
Like other states, New York has its own specific requirements for forming an LLC. But if you follow the rules, you stand to gain some great benefit. By setting up an LLC, you protect yourself from legal exposure for the business’s debts and obligations. These liability protections make setting up an LLC a great choice for freelancers and startups.
Let’s go through the seven steps you need to complete in order to set up an LLC in NYC. Pay close attention because we’ll share one tip which can save your business hundreds of dollars during the formation process.
The requirements for setting up an LLC in NYC are no different than the requirements for setting up an LLC in other parts of New York state. To set up your LLC, you’ll need to follow the rules of the New York Department of State. The NY Department of State says a business is eligible to set up an LLC if (1) the business is located in NY, or (2)the business is operated by a NY resident.
Even if you meet these basic two requirements for forming an LLC in New York, there are dozens of licensing, zoning, and industry requirements you might have to meet to legally operate a business in NYC. For example, operating a daycare, a food service establishment, or a home-based business all require special permits. Even temporary situations or one-time events—such as a grand opening in a public park or on a city block—require special permission from the city.
For help understanding the requirements, head over to NYC Business and click on the “Step By Step” link to determine exactly what you need to do to legally start your business in the city. In about 10 minutes, you’ll have a customized list of requirements for your business.
Figuring out zoning, licensing, and industry-specific requirements for your business is essential, but the biggest investment of time and resources is actually forming your LLC.
Here are the seven steps you need to follow to set up an LLC in NYC:
Your LLC name needs to follow these guidelines:
The most important of these requirements is the last. Your LLC’s name from be distinct from the names of other LLCs that operate in New York. You can check whether a business name is available by reviewing the state’s Corporation and Business Entity Database, Yelp listings, and the yellow pages.
However, the only way to confirm the availability of a business name is by submitting a written request to the Department of State. They charge a search fee $5 for each name submitted. If your chosen name is available, you can reserve it for up to 60 days by paying a $20 name reservation fee.
Every business that operates in NY must designate a registered agent 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.
If you do not designate someone, the New York Secretary of State acts as your registered agent by default. You can choose a business lawyer to be your company’s registered agent, or you can choose an online legal service like IncFile or LegalZoom (which can also help with LLC formation).
The articles of organization is the document that establishes your LLC as a separate legal entity. The articles of organization, which is a two-page document that you can download online, contain basic information about your New York City LLC. You’ll need to provide the name of the business, the county it’s located in, the registered agent’s address, and the filer’s name and address. The filer can be you, another business owner, or even someone from outside the business.
You can file your articles of organization in person or online. Either way, you’ll need to pay the one-time nonrefundable filing fee, which is currently $200.
In order for your LLC setup to be complete, you have to publish a copy of your articles of organization in one daily and one weekly print newspaper for six consecutive weeks, within 120 days of the formation of your LLC. Instead of the articles of organization, you can publish a notice announcing the formation of your LLC. You can contact newspapers on your own or hire a third-party service to take care of the publication requirement for you.
Once you fulfill the publication requirement, you must submit a Certificate of Publication, along with a $50 filing fee, to the New York Department of State. This requirement might seem archaic because it is. Back in the day, newspapers were the only reliable way to notify the public that a new business had been formed. New York, Arizona, and Nebraska are the only three states that still hold onto this requirement, but failure to comply will result in the suspension of your LLC.
The publication requirement states that you have to publish notice of your LLC’s formation in two newspapers (one daily and one weekly) that run in the county where your LLC’s office is located. There are no court rulings or decisions that have specifically defined what an LLC’s “office” means for publication purposes.
If your LLC’s office is located in New York City, this means your LLC notice must be published in a daily and weekly NYC newspaper. Due to steep publishing rates for NYC newspapers, it could easily cost you several thousand dollars to fulfill the requirement.
If, however, you choose a registered agent outside of NYC, you can use the registered agent’s address as the office address of your LLC. This means you can avoid the prohibitively expensive NYC newspapers while still fulfilling your publishing requirement. This can end up saving you thousands of startup dollars that you can put towards better use.
Technically, this step is optional. But, we highly recommend creating an LLC operating agreement to form the backbone of your business.
This agreement typically includes the following:
Consider hiring a startup lawyer to prepare your LLC operating agreement. Without a clear and comprehensive agreement, your company could be dogged by needless conflicts among owners.
Most LLCs need to obtain a federal tax ID—also called an employer identification number (EIN)—for tax purposes. Sometimes, an EIN is also necessary when opening a business bank account or applying for business loans.
The only LLCs that don’t need a federal EIN are single-member LLCs with no employees and no excise tax duties. All other LLCs need to apply for an EIN with the IRS. Once you get your EIN, businesses with employees must also register with the NY Department of Labor.
Once you set up your LLC in NYC, you’ll need to keep track of a few things each year to keep your LLC active. Most LLCs are pass-through entities, which means the responsibility for paying federal income taxes falls on the LLC owners. Individual LLC owners in New York do not pay state income taxes, but New York assesses an annual filing fee on most single-member LLCs and multi-member LLCs.
The annual fee ranges from $25 to $4,500. The exact amount depends on your income from the LLC. You’ll also need to pay federal and state payroll taxes if you have employees. And if your LLC sells goods to customers in New York, you’ll have to collect and remit sales tax.
Although there are dozens of licensing requirements and other restrictions surrounding starting a business in NYC, setting up an LLC in NYC is pretty simple. The biggest stumbling block is the publication requirement, which can get expensive. With a little planning, though, even this requirement is not overly onerous.
Your steps for how to set up an LLC in NYC:
Creating an LLC in NYC might be the best business decision you make. Don’t let the setup process—and that strange publication requirement—deter you from taking this vital step to protect yourself and your personal assets. Most of the steps are straightforward enough to complete on your own, though you might want to call in an attorney to create your operating agreement. Good luck!