In addition to answering frequently asked questions, this guide will walk you through the process of forming a limited liability company (LLC) in New York, explain state-specific requirements, point you in the direction of crucial documents, and even go over the best practices for creating your LLC. You can start your new venture with confidence.
Pros and Cons of Forming an LLC in New York
Pros
- Personal financial risk is usually decreased since personal assets are usually protected from corporate debts and obligations.
- LLCs provide members a flexible management structure so they may decide how to operate the company.
- Being an LLC may improve your company’s professionalism and trustworthiness with clients, partners, and investors.
Cons
- The yearly registration fees and initial creation charges of LLCs are comparatively expensive in New York.
- Strict publishing requirements and yearly report requirements are among the many compliance requirements in New York.
How to Form a New York LLC: A Step-by-Step Guide
You may be the next business owner in New York to learn how to create a New York Limited Liability Company in order to better safeguard your personal assets and expand your firm.
Step 1: Give Your New York LLC a Distinct Name
The condition that your LLC name be unique (not already been used by another New York LLC or firm) should relieve your mind as you want your business to stand out. Have you decided on a name for your LLC yet? You may do an LLC name check in New York’s business name database to make sure your name isn’t already registered with another company in the state. A written request may also be made to the Division of Corporations.
In the event that your preferred name is taken but you’re not quite ready to incorporate an LLC, you may submit a reserve of name form in New York. You may use that name for 60 days with this $20 purchase.
Additionally, there are a number of terms and phrases that are forbidden by New York state law from being used in the name of an LLC. For instance, “Jane Smith Architecture, L.L.C.” rather than “Jane Smith Architecture.” New York LLCs must contain the words “Limited Liability Company,” “LLC,” or “L.L.C.” The approval of governmental or professional organizations may be needed for other terms or expressions. Please check the whole list before adding your name.
Inside Scoop: Although you may operate under a trade name like “Coolest A/C in the Bronx,” you can establish your LLC in New York using the formal name 5 Boroughs HVAC L.L.C. To do this, you must file a Certificate of Assumed Name, which costs $25 plus additional fees for each county where you will do business ($100/each for New York City, Kings, Queens, Bronx, and Richmond counties and $25 for all other counties). This is known as a “doing business as” (DBA) name, or a “assumed name.”
Step 2: Submit the Articles of Organization for Your LLC
After selecting a name, the paperwork has to be started. To officially establish an LLC in New York, you must submit your articles of formation to the Department of State. You will get a receipt from the state after filing, and you may choose to have a plain copy, certified copy, or certificate of existence for your LLC. For $25 per certificate, you may also request a more ornate certificate that is printed on 11 x 14 parchment paper and appropriate for framing. New York Articles of Organization normally take seven business days on average to process. For an extra cost, you may, however, expedite this process with the Division of Corporations.
A straightforward, fillable form called the articles of organization form reads as follows:
- The company’s name
- The county where the headquarters of your company will be situated
- A street address where mail may be delivered to your LLC
- Name, address, and signature of the organizer (or, if you are the one creating the LLC, your details)
You may use a virtual address for LLC-related business communication if you run a distant company out of your home or if you want to provide prospective customers with an address in the center of New York City.
Do I Need a Registered Agent for LLCs? What Is a Registered Agent?
A registered agent is a person or organization that, on behalf of a business, receives service of process and other significant legal papers from the state. New York does not need your company to have a registered agent in order to receive process service, in contrast to other states’ LLC requirements. Rather, this function is automatically performed by the Secretary of State, who will also transmit a copy to the company address that is on file.
Still, you have the option to choose your own registered agent for your New York LLC. This is often more practical and ensures that you get critical documents, such notification of any lawsuits filed against the company, promptly. Your registered agent may be anybody over the age of eighteen who has a street address in New York City, provided they are available during regular business hours. In your articles of incorporation or next biannual report, you should provide the registered agent’s details if you choose your own. A seasoned New York registered agent service is another option.
Step 3: Draft an Operating Agreement for an LLC
Within ninety days of filing their articles of formation, LLC members in New York are required to draft and approve a formal operating agreement. The rights, obligations, responsibilities, responsibilities, and liabilities of each member to the LLC are outlined in the operating agreement. There is no need for what should be contained in this document, nor does it need to be filed with the state; nonetheless, copies of it should be sent to each member.
Inside Scoop: The operating agreement of an LLC lays out each member’s obligations and privileges. Unless your LLC is made up of just one person, you may want to consider speaking with an attorney to make sure that your operating agreement is well-drafted and adequately protects the interests of each member.
Step 4: Complete the Publication Requirements for New York LLC
The publishing requirement is one of the most peculiar regulations to comprehend while studying how to create an LLC in New York. An LLC is required to publish a notice of formation or a copy of its articles of organization within 120 days of the state accepting the LLC’s articles of organization. This notification must be issued for six weeks straight in the county where the LLC has its registered office, and it must appear in two newspapers chosen by the county clerk.
An affidavit of publication will be sent to the LLC by the printer or publisher of each newspaper after each notice has run. After that, the LLC has to submit a Certificate of Publication, pay the $50 filing fee, and include the newspaper affidavits of publication.
Inside Scoop: Hold off on printing! The cost of publishing varies greatly around the state. Compared to newspapers in large cities, smaller rural newspapers are far less expensive. Because of this, a lot of tiny New York LLCs choose to save money on publishing by using the address of a professional registered agent business located in a less expensive region.
Step 5: Obtain an EIN (Employer Identification Number)
For taxation reasons, the Internal Revenue Service (IRS) must provide an employment identification number (EIN) to each New York LLC with multiple members. A Federal Employer Identification Number (FEIN) is another name for an EIN. This number is a special identification that effectively does the same thing for a company that an individual’s Social Security number does.
An LLC may create a company bank account, apply for credit lines, accept payments, cover employee and business expenditures, and carry out other financial operations with the help of an EIN.
Inside Scoop: Depending on the circumstances, your LLC may not need an EIN. But, if you want to do any business, pay specific taxes on the company’s behalf, or recruit staff, you will need one.
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How to Form an LLC in New York
Your option of how to create an LLC in New York should take into account the intricacy of your firm, the amount of time you have available, and your financial situation.
DIY
For companies looking for the most economical way to launch, doing it yourself is a popular alternative. There are no other expenses save the state fees. Excellent materials are available from the New York Department of State that provide instructions on how to create an LLC in New York and cover all LLC criteria. The drawback of do-it-yourself company formation is that, depending on the kind of venture you’re launching, the intricacy and duration required to file by hand will probably be more taxing than shelling out extra money to hire an LLC formation agency to handle the paperwork.
LLC Establishment Assistance
For any new firm wishing to launch as an LLC or transition to an LLC structure, one of the greatest online LLC services is a perfect choice. ZenBusiness, Incfile, Swyft Filings, Northwest Registered Agent, and LegalZoom LLC services provide easily configurable price plans and optional features to make the formation and upkeep of your LLC simple. All you have to do is provide the necessary data, and the service will take care of creating and filing the paperwork.
Engage a Lawyer
Although hiring an attorney will be the most costly option, it could be the best option for businesses that want to establish a non-traditional tax structure (such as an S-Corp or C-Corp) or have complicated financing arrangements.
How Much It Costs to Form an LLC in New York
The process of forming an LLC in New York is not without cost. A $200 filing fee is required to begin the procedure, which is more than the national average. In addition, New York charges $9 to $25 in yearly filing costs, which vary based on the overall revenue of your LLC. Although these costs may first seem reasonable, they have the potential to mount up over time, especially for companies that generate high profits.
Moreover, LLCs must comply with a publishing requirement in New York, which may increase your startup expenses. This mandate requires you to issue a notice of your LLC’s creation for six weeks in two publications (usually one weekly and one daily). This advertisement cost might potentially exceed thousands of dollars, depending on the county.
Continue to Manage Your New York LLC
Whether you are an LLC, sole proprietorship, or another kind of company organization, the state or local municipality need an LLC business license for many different kinds of commercial activity. Be certain that you have the necessary LLC licenses before doing business in New York. Visit the state website (New York Business Express) for further information.
LLC Levy
LLCs with only one member are subject to single proprietorship taxes. In other words, you have the option to choose for the entity to not pay taxes. The owner of a single-member LLC who takes this option is required to include the LLC’s income on their personal income tax return. The tax responsibility passes via the LLC and to the individual members, thus the term “flow-through” taxes. An LLC that has more than one member, or a multi-member LLC, will be regarded as a partnership and could need to submit Form IT-204 in order to declare its revenue.
Your company’s tax status does not immediately change when it becomes an LLC. Unless you take further measures (such as becoming an S-Corp), your new LLC will continue to be a “disregarded tax entity.” Each member remains individually liable for paying taxes on the LLC’s revenue (including self-employment, state and federal income taxes).
LLC State Taxes in New York
New York levies an annual filing fee to any firm operating as a disregarded tax entity with any revenue, gain, loss, or deductions received from New York sources if you choose not to modify the tax structure of your LLC. Most LLCs will be covered by this. The minimum price is $25, and the amount fluctuates according on the revenue of your LLC. The Department of Taxation and Finance’s state website allows you to file online and pay the required amount. Alternatively, you may download and send Form IT-204-LL together with your payment.
You could be required to pay extra state taxes, such as sales tax if you sell taxable goods, depending on the kind of company you’re doing.
Reporting Needs for LLCs in New York
After learning how to form an LLC, you must comply with certain regulations in order to keep your LLC in good standing with the state of New York. There are a few standard filings that you should be aware of.
In order to keep an LLC in effect, reports must be filed annually in several other states. The need for domestic and international LLCs to submit a biannual statement every two years is halved in New York. It changes or verifies the postal address (and the registered agent, if you have designated one) to whom a copy of any process received on behalf of the LLC may be sent by the New York Secretary of State.
Using the Department of State’s e-Statement Filing Service, you may electronically submit your biannual statement and pay the $9 filing fee using a credit or debit card. It may be submitted at any point in the month that the initial articles of incorporation or the application for authority for your LLC were submitted. There will be penalties for late files and rejection of early submissions.
Creating an LLC Bank Account
The liability protection that an LLC offers its members is one of the key characteristics that make it so appealing. Nevertheless, this safeguard is only ensured inasmuch as the member’s assets and the company’s assets are entirely segregated. For this reason, one of your first moves after forming an LLC should be establishing a bank account and obtaining a company credit card. Before considering national possibilities, check with local banks in New York to see if they have any unique rates or other benefits for your business.
Getting an LLC to Purchase Business Insurance
You shouldn’t run your company without insurance, just as you wouldn’t own a house or vehicle without it. There is always a chance of being sued by people your LLC conducts business with, even if the hazards of property damage aren’t as great for a company as they are for a home or automobile.
For additional information on what’s ideal for your company insurance coverage, speak with a local insurance agent. Not all LLCs will need the same kind of coverage.
Employers Hiring
If you’re thinking about expanding your LLC by adding more employees, keep in mind that New York has tax obligations for companies that fit specific standards. To register with the state as an employer for tax reasons, you must also ensure that you have an EIN. As an employer, you must abide by all rules, such as:
- reporting of new hires
- Making unemployment insurance payments
- Withholding of taxes
Promoting Your LLC in New York
You should aim to develop your clientele and company after forming your LLC. Being online is one of the simplest ways to do this. This may be accomplished by making an Instagram account specifically for your company or by utilizing a website builder to establish a page where you can sell your goods and services. Either will increase your web presence and draw in new clients.
Using an LLC in New York for Estate Planning
You have even more incentive to learn how to create an LLC if your company is one that you want to maintain in the family for many years to come. LLCs in New York are effective estate planning instruments. Families that own businesses, rental properties, investment real estate, or other types of assets might reduce inheritance taxes by setting up a family limited liability company (LLC).
You may transfer your assets to the LLC and designate yourself as manager and member along with your spouse or partner. Then, if the LLC’s percentages qualify for federal gift tax exemptions, you may give your kids percentages of the company each year. This method shields the LLC’s assets from creditors and enables you to get a large tax value reduction.
The value of your gross estate at the time of your death decreases along with your stake in the LLC, which lowers or eliminates death taxes. Real estate and other investments may flow to other members without going through the probate procedure when the title is transferred to the LLC.
Speak with a knowledgeable New York probate and estate lawyer if you’re thinking of creating an LLC as part of a larger asset management plan. To make sure the LLC operating agreement is valid and optimizes your estate tax advantages, they may construct it in compliance with state laws and regulations.
What makes an LLC? New York and the Development of Small Enterprises
A mix of a corporation and a sole proprietorship, LLCs are established by the state. This form combines all the liability protection of a corporation with the tax advantages of a sole proprietorship to provide the perfect structure for small enterprises.
Less than 100 people work for the great majority of New York firms (98%) throughout the state. However, when taken as a whole, these tiny companies employ almost half of the state’s private sector workforce. A vast range of initiatives and programs that assist small company owners and promote their expansion are managed by the state’s Small company Division.
New and established small enterprises may get resources, training, and advice from organizations such as the New York Small Business Development Center. They assist a lot of locals who are thinking about forming an LLC in New York in learning the fundamentals, such as how to draft a business plan, where to get capital, how to form an LLC in New York, and more. For lone owners who want to expand their small enterprises, learning how to create an LLC in New York could be the next best move.
The Bottom Line: Forming an LLC in New York
In New York, forming an LLC just takes a few simple steps and is a reasonably simple procedure. To make paperwork easier, the state offers a wealth of materials, including template forms and step-by-step instructions. New York is among the greatest states in which to form an LLC because of these resources. You’ll get off to a terrific start if you make use of the state’s helpful services. Examining top LLC formation services may also help to expedite the procedure.
FAQ LLC: New York
What does LLC stand for?
An LLC, or limited liability company, is a type of business organization that combines the liability protection and tax benefits of a corporations, with the ease, informality, and ownership control of a partnership. LLC is an abbreviation for Limited Liability Company, and it is one of the best options out there for business owners – whether you’re starting a new business or looking to grow an existing one.
If you’re thinking about starting an LLC, New York makes it easy, relatively inexpensive and fast. An LLC allows its members a high degree of flexibility while providing legal protection and separation from their other business and personal affairs. In NY, members of an LLC can be individuals, corporations, partnerships, limited liability companies or any other legal entities.
LLC vs. Sole Proprietorship: What’s the difference?
A sole proprietorship has a single owner who operates a business and takes all the liability of the business in addition to all the income and debts of the business. Under this structure, if someone sues the business and wins, the owner’s personal assets can be taken to pay out the lawsuit. A general partnership has the same features except there are at least two owners that own and share the business profits. On the other hand, an LLC assumes all liability of the business. That means if someone sues the LLC and wins, only the assets held by the LLC are vulnerable.
Pros & Cons of an LLC in New York
Before making a permanent decision about which type of entity is best for your business, you should review some pros and cons of LLC structure.
| Pros | Cons |
| Flexible management options (member-managed or manager-managed) Pass-through tax entity Personal asset protection | State formed and recognized (will need to register in each state you’ll conduct business in LLC taxes Filing cost |
LLC vs. Sole Proprietorship: What’s the difference?
A sole proprietorship has a single owner who operates a business and takes all the liability of the business in addition to all the income and debts of the business. Under this structure, if someone sues the business and wins, the owner’s personal assets can be taken to pay out the lawsuit. A general partnership has the same features except there are at least two owners that own and share the business profits. On the other hand, an LLC assumes all liability of the business. That means if someone sues the LLC and wins, only the assets held by the LLC are vulnerable.
LLC vs. Corporations (C-Corps / S-Corps): What’s the difference?
A corporation has owners called shareholders and, like an LLC, it assumes all the liability, income and debts of the business. The biggest difference between an LLC and corporation is how each entity is taxed. LLCs are pass-through entities that are only taxed through the members, whereas corporations are double-taxed (once at the corporate level and once at the shareholder level).
An LLC is a type of business entity, whereas S-Corps and C-Corps are types of tax structures. With additional paperwork, an LLC can elect to be taxed as an S-Corp or C-Corp. However, to get all the features of a C-Corp (taxation and ownership), your company must incorporate.
| LLC | S-Corp | C-Corp |
| Pass-through tax entity Unlimited number of members LLCs can’t go public | Pass-through tax entity Maximum of 100 shareholders S-Corps can’t go public | Double taxed (once at corporate level and once at the shareholder level) Unlimited number of shareholders Can go public |
How much does an LLC in New York cost?
While there are other costs besides filing associated with starting an LLC, New York charges a $200 filing fee that must be paid when you submit your articles of organization.
How long will it take to form my LLC in New York?
If submitting your documentation online, the formation of your LLC will be immediate, so long as the documents are complete and correctly filled out. However, it can typically take seven business days if you file it through the mail.
Can I file my LLC and personal taxes separately?
In its traditional structure, an LLC’s income is passed through to the members. If there’s only a single member, then that member claims the LLC’s income on their personal tax return. In other words, there’s no way to file LLC and personal taxes separately because an LLC is only distinct from the members for liability purposes.
What types of LLCs can I form in New York?
Professional LLCs: Professional LLCs (PLLC) are allowed in New York. A PLLC is a type of limited liability company that is formed by professionals for the purpose of rendering services which require a state license. These types of professional services are designated under Title Eight of New York Education Law, and include attorneys, physicians, architects, and more.
Foreign LLCs: Foreign LLCs are allowed in New York. They are a type of LLC which operates in one state and wants to expand into New York. Note that Foreign LLCs do not refer to LLCs doing buisness internationally, but rather interstate. So, if you’re already registered in a different state like New Jersey, Pennsylvania or Connecticut as an LLC, New York requires you to file an Application for Authority with the Department of State rather than articles of organization. You must attach a Certificate of Existence (sometimes called a Certificate of Good Standing) dated within the past year from your LLC’s home state. The fee is $250.
Series LLCs: Series LLCs are offered in several states, but New York is NOT one of them. A series LLC is an entity that’s made up of other smaller LLCs or business entities. It keeps the larger LLC separate from each of the smaller components to better protect the LLC’s assets.
When should I form an LLC for my business?
While a business could form an LLC at any time in its lifespan, when your business intends to undertake a financial risk, it is usually best to have a structure that has liability protection. For example, an entrepreneur operating as a sole proprietor decides they no longer want to rent a space to sell goods from, but wants to purchase a property.
If the business fails to make enough money to pay the property’s mortgage, then the proprietor’s assets could be at risk when the bank comes to collect debt that is owed. If the proprietor converted the business into an LLC, the bank would be limited to only the assets of the LLC, since LLC owners are separate from the legal entity that owes the debt.
