New York is considered to be the world's famous center for industry and business.
There is a lot of activity going on around the clock. If you intend to launch a business in this state, you will have to learn a relatively large number of rules. Some of them may seem confusing and others - incomprehensible. But in fact, you can easily figure out how to open an LLC in New York.
In this article, we'll cover the basic steps you need to take to become a business owner in New York. We have written them as clearly as possible to make things understandable to everyone.
You will learn about:
Table of Content
Before you start your own venture, you need to come up with a good LLC name and check it as well. Of course, if you have enough imagination, you will have a wide range of choices. However, New York law (Section 204) limits your options and sets certain rules for LLC names.
As in most other states, in New York, you have to name an LLC with a mandatory indication of the type of entity, i.e. the name should contain the words "Limited Liability Company" or the abbreviation "LLC" or any of its variations. Under Section 204(b), you will also have to add words to prevent people from confusing your enterprise with other organizations or DBA names of the firms that operate in New York.
You want to create a company called "Martha's Manhattan Pizza, LLC". But when you search the list of already registered firms, you find an existing business with almost the same name. You will have to select a different name or add words to make your venture stand out from the already existing ones.
Once you have found a good name that differs from the ones of other entities incorporated in New York, it's time to check whether it contains any prohibited words. Under state law, in Section 204 and subsections (e)-(i), you can see a long list of words that businesses are not allowed to use to name an LLC. It's worth checking your name against this list.
To state it as a rule, don't use words that might make people think that your venture is:
Keep in mind that these are general rules, and it is better to check the word list in Section 204 to make sure your name does not violate any laws.
You should also take into account that some of the words may be allowed. It requires prior authorization from the New York state agency, which regulates your type of business, according to Section 204.
The basic rule is: if you want to get a license to conduct certain activities, you'd better double check with the Department of State to see whether your chosen name complies with state legislation. There are also government agencies, which provide licenses for different types of businesses. It is also best to consult with them in advance. In some cases, you may have to get prior written approval.
To determine whether the preferred name is available, check the list of companies already doing business in New York. To that end, you can pay the Department of State a $5 fee to perform a name availability search.
However, you will also have to spend another $20 to reserve the chosen LLC name for 60 days. Therefore, some business owners prefer a more cost-effective method. On the Department of State website, you can go to the free public inquiry page and do your own search.
If you check the name yourself, make sure that you have studied not only the list of LLCs but also partnerships and corporations since your name should be different from the names of these types of organizations too.
You can send your request to:
Department of StateDivision of Corporations
One Commerce Plaza
99 Washington Avenue
Albany, NY 12231.
Under Section 204(c) of New York law, you are required to use the actual name of your LLC on posters and promotional materials. To change it to a shorter and more succinct brand name, you will need to apply for a DBA, a fictitious business name, with the Department of State. It will allow you to identify who owns the company.
Regardless of the reason you feel more comfortable using a DBA, you should keep in mind that it is a very common solution since it is easy and quick to register. You can study the DBA rules in Section 130 of the General Business Law. Consider that the Department of State will not allow you to use a DBA to get around the restrictions of the naming laws.
Once you have decided on a business name, you need to file a special certificate with the Secretary of State's office. It can be signed by an LLC member or an authorized employee, such as a director or attorney.
The DBA certificate has to include:
Note also that you will need to pay a $25 fee to register for a DBA certificate. To make the process easier for business owners, the Department of State offers a form to fill out on their website.
A registered agent refers to a firm or individual that serves as an intermediary between an LLC and the world. The agent will receive your mail, provide service of process, and be your point of contact in many situations.
That way, if someone sues your organization, the registered agent will get all the documents and pass them on to you. You can't operate in the United States without an agent. Thus, if people sue you but do not find your agent, the judge will probably rule on their request without reviewing the case and your participation. And the decision will not be in your favor. Hence, if you are not involved in the case, the court will rule against you.
There are some unique laws regarding registered agents in New York. Under Section 301 of the Limited Liability Company Law, the New York Secretary of State has to be appointed as one of the registered agents. Section 302, however, allows you to select another agent for your firm at your discretion.
Given this unusual legislation, you may wonder whether you need a registered agent at all. And if you don't choose one, the government will do everything for you, right? In fact, it's better to find a reliable registered agent for your organization. It makes financial and business sense.
Service of process is a legal term used for business correspondence and legal papers.
The financial advantage of working with an agent in New York is unique. The point is that after establishing an LLC, you will have to publish a notice of the company's formation. It should be in the local newspaper where your office is located.
If you hire an agent, the notice can be published with the registered agent's address. This means that if your New York City LLC publishes the notice using the agent's address in the northern part of the state, it saves up to $150 compared to the same notice in the New York newspapers.
Having an office in New York is prestigious and often profitable for business development. At the same time, the savings from the location of the agent allow you to pay for the services of the agent of your choice for several years.
Not all companies establish offices in New York City. If you are one of those entrepreneurs, you may still hesitate whether it will be beneficial for you to cooperate with a registered agent. There is already a lot of money spent on setting up your LLC. Anyway, it's still worth choosing a registered agent that fits your needs.
The temptation to refuse the services of an agent can be explained by the following reasons:
You can choose to be your own registered agent in New York, and it's legal. However, before you make that decision, think about these issues:
Working with a registered agent helps you avoid all these problems. On the Internet, everyone sees the agent's address and contacts, not yours. That increases the level of your privacy. Agent services themselves are reasonably priced. More often than not, they cost about $100 a year. Think twice whether your peace of mind and the absence of junk mail is worth that money. Most likely, you will realize that it is not expensive.
You will probably not need an agent every day. But when you do require one, this person should be reliable. Choose a provider with a good reputation and invest in a decent business solution.
If you are interested in the benefits of hiring registered agents, take a look at our list of top firms. It will help you compare different solutions and choose the best candidates.
One more crucial point: if you do business in more than one state, you have to register as a foreign enterprise. And you can choose an agent that works with several states and pay a single company for the whole list of services without worrying about the details.
So, you've decided on the right company name, found the best registered agent in New York, the next important step is to draft and file the Articles of Organization. This is the fundamental legal document that defines the rules for the existence of your LLC. It has to be drawn up in detail, carefully, taking into account the requirements of the law and the peculiarities of the business you are establishing. Section 203 of the Limited Liability Company Law states that after the documents are signed and submitted, your firm is considered to be fully legal and ready to commence business in New York.
If you have difficulties or want to avoid the hassle of opening a new firm, you can find a company that provides business formation services. We describe the best LLC creation services in our article. The most interesting offers are presented there.
Section 203(e) describes what your document should contain:
If you want to get the Articles of Organization in New York in the simplest way possible, you can use a ready-made form to fill out on the Department of State's website.
According to the New York Department of State, the cost of filing the Articles of Organization is $200. However, within 120 days of submitting the documents, you have to provide a certificate confirming that you have published a notice in the newspapers as required by Section 206. The cost of this certificate is $50.
According to the Department of State's website, it can take up to 7 working days to process the Articles. If you want to get the paperwork processed faster, the Department of State has three options for expedited service.
They are the following:
In New York, all LLCs are regulated by a written Operating Agreement. It refers to a contract, which is signed by all members and describes in detail the basic rules of the company's activities. The Operating Agreement links the participants and managers of the venture and outlines their responsibilities and rights.
A well-crafted Operating Agreement is as detailed as a good user's manual but for an LLC. You need to think about all the possible situations and challenges that may arise during the life of your entity and the methods you will use to get out of them. For example, a thorough description of firing a manager, leaving, or adding a member. The better the planning is, the higher the quality of the LLC will be.
Section 417 of the Limited Liability Company Law says that a written agreement should be signed. Most states do not have such a requirement. However, in New York, within 90 days of filing the papers, you are obligated to sign the document. There is no need to file Operating Agreement LLC.
New York law has no strict requirements for the structure and content of the contract. Therefore, you can draft it any way you want.
The Articles of Organization describe such topics for the Operating Agreement:
Still, this forms the basis. In fact, your Operating Agreement should cover many more things. You need to include as much detail as possible, describing all possible situations and clarifying all the important points.
A well-drafted Operating Agreement usually includes such clauses:
You may have to amend your Operating Agreement in the future. Moreover, there should be guidelines for doing this.
In New York, there is another clause in the law that is found only in a few states. It is a requirement imposed on a new LLC to publish in two local newspapers an announcement of its formation. And we are talking only about the printed media.
This is a rule left over from the pre-Internet period when newspapers were the only way to find out about the new company in the region. Another reason lies in the prohibition on the secret creation of ventures so that assets cannot be hidden from spouses or creditors. This is an ancient rule, and the effectiveness tends to zero today, but it continues to work.
Section 206 of the Limited Liability Company Law states that such an announcement should be published within 120 days. You can do it yourself or entrust this process to a lawyer or a registered agent.
Publishing the notice on your own is the cheapest solution. You should contact the clerk of the county where your business or registered agent is located. They will give you the two papers where you will publish the notices. It seems a bit of a hassle but is very easy. If you have some time, it's even fun. When else will you deal with submitting a notice to a real newspaper!
The most expensive solution is to publish through a lawyer. An attorney can charge hundreds of dollars per hour. The process, of course, will be flawlessly smooth, but the price will be extremely high. It is better to take advantage of the professional's services of such a level more wisely.
Using a registered agent to publish a notice sometimes makes sense. Some agents are willing to do this for you. However, they usually charge about $200. The quality of their work is as good as a lawyer's. If you do not have enough time or knowledge to handle everything, this is a great option. Moreover, it makes sense if your real location and the registered agent's office are far from each other, and going to another county is not feasible.
The cost of publishing directly depends on the county. For example, in Albany, you have to pay from $150 to $200 per notice. And in New York City, the price will go up to $1,500 and may even be higher.
This significant price difference is one of the reasons why registered agent services are so popular in New York. Many LLCs turn to agents with the main goal of saving a significant amount of money on publishing notices by placing an agent in a low-cost county.
One thing to keep in mind is that after the publication is done, you or your agent should file a certificate with the Secretary of State (The form is included in the text of Section 102 of the Limited Liability Company Law). This document has a fee of $50.
When you pay your personal income tax, the IRS identifies you with your Social Security Number. An enterprise is not an individual and does not have such a code. Therefore, ventures use an EIN. It helps the federal agencies track your organization and its taxes, as well as monitor the company's activities.
However, not every LLC needs to apply for an EIN. It is usually required in the following cases:
In addition, you will need an EIN, regardless of the above-mentioned conditions, if you want to open a bank account for your enterprise.
A big plus is that it is relatively easy to get it. Go to the IRS website and apply online. It won't take more than 5 minutes. You can also send the IRS form SS-4 by mail or fax.
It doesn't make sense to pay an assistant to get this number. But if the provider offers an EIN as a service included in the package, you can use it as a time-saving perk.
Compare the conditions for opening an LLC in New York with other states:
Delaware vs New York
You have taken many steps from choosing a company name to creating the Articles of Organization, the Operating Agreement, and a publication of a notice. And now, your LLC is ready to operate. Still, it’s not it. There are a few things you should also think about before you set up the business.
For your new LLC, it is recommended that you open a business bank account. You won't spend more than a couple of hours in the bank, but you'll get lots of perks. Let's discuss the main reasons briefly at first, and then, in a bit more detail:
For your LLC to do the bookkeeping, banks provide you with account statements every month, and there are other options to help you automate and analyze your company's financial flows. However, once you mix personal and company funds, it becomes extremely complicated and confusing.
In addition, when registering a firm, business owners obtain legal protection of their personal assets. But this works only if the organization has a separate bank account. Then, in the event of business problems, the so-called corporate veil will work. Your assets and the company's funds belong to different legal entities and individuals. If you mix money in one bank account, the veil will stop working.
You would better not use the funds from the bank account for your personal needs. It will also hinder the effectiveness of the corporate veil. For example, trying to pay for a child's school fees from a company bank account, as well as when clients pay for the services into your own accounts. Keep your personal and your business money separate.
Quite often, such protection is the reason for the creation of an LLC. Therefore, be sure to get a bank account and organize your work properly.
Most of us protect our health, vehicles, real estate, or any other property with insurance policies. Businesses also need this kind of protection against the unexpected events. Below, we have listed the most common types of insurances you may want to obtain:
You have gone through all the steps: you have opened an LLC, and your business is up and running. In New York, it is usually not that easy, but you have succeeded. Now, you need to manage properly and not forget about the legal requirements. Set reminders in your calendar to submit your paperwork and pay taxes on time. This will help you avoid unnecessary expenses and problems.
If your enterprise sells goods and delivers services that are subject to sales tax (and most likely they are), your LLC should have a Certificate of Authority from the New York State Department of Taxation and Finance. You can use this document to collect sales tax from your customers, and you'll get it as soon as the business commences operations.
You also have to remember that many businesses can only be conducted if you have a professional license for operation in New York. Be sure to think about all the types of goods and services you need.
Moreover, you should have a permit from the city or county before you start. For example, New York City has a large list of licenses and permits for different types of businesses. Other counties may have fewer requirements, still, you should check what permits you need. And then, of course, you have to comply with them all.
If your company hires employees, it will need to register with the state and pay taxes.
In terms of income taxes, LLCs are flow-through entities. They do not pay taxes on their income. These funds are distributed to the members of the LLC, and then they pay taxes on their profits. Thus, the tax is passed on to the LLC members.
Depending on how you plan to run the LLC, the taxation system changes. It can be a sole proprietorship, a corporation, or a partnership. As a result, you will have to deal with different tax forms. Check with your accountant about the documents you need to file on behalf of your organization and what you have to submit personally, including a partnership or franchise corporation tax return.
At times, the LLC also needs to pay a filing fee or estimated income tax on behalf of particular members.
Your LLC is a pass-through legal entity from a federal tax perspective. In either case, the company's profits or losses should be shown on your personal tax return.
Under Section 301 of the Limited Liability Company Law, you are required to file a statement on behalf of the entity with the Secretary of State in a timely manner every two years. This is a biennial report, which is submitted the same month your LLC was created. It consists of the company mailing address where the Secretary of State's office will continue to forward the mail it receives as your registered agent.
You can ignore this report and a separate filing date if you get approval from the Department of Taxation and the Secretary of State to allow you to put the information in the first paragraph of the LLC annual tax report. Such filings are in a digital form approved by the state. Discuss such an option with your accountant.
A limited liability company is a welcoming legal structure for many businesses. Start an LLC is easy. Select your state to start.