How to Start an LLC in New York
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When you have decided to launch a startup and chosen its business structure, you have taken an important first step. In order to formalize the decision, you need to follow the state’s guidelines for creating an LLC, which will make your business a legal entity in New York.
New York City is home to some of the world’s largest companies, the biggest names in performance, and the busiest tourist attractions. But the streets of Manhattan are also filled with small businesses, from bodegas to souvenir shops, and this entrepreneurial spirit spreads across the whole state. Over 98% of businesses in the state can be classified as small businesses, many of which are formed as limited liability companies. If this is the path you are choosing for your New York business, following this step-by-step guide will help you join these other LLCs and begin operations.
Name your LLC
Have a name in mind? See if it’s already listed in the state’s business directory. If the name comes up in a search, it’s taken. If it doesn’t, it’s yours to claim.
Before you can move forward with any legal processes, it is important for your business to have a name that can be used on paperwork. A name is also one of the most critical decisions you will make for your business- it is how customers will find you, so it should be clear about your services as well as easy to remember. When choosing the perfect name for your LLC, there are both New York specific considerations to keep in mind, as well as more general ones.
New York naming rules
Because businesses are registered at the state level, this is how names are regulated. That means that a business name cannot be the same as any existing business in the state. New York enforces this rule and does not allow business entities to have indistinguishable names from one another. You can use the Secretary of State’s website to research name availability.
If your name search shows another company doing business under your proposed name, you won’t be able to use the name for your new business.
In addition to this requirement, New York also requires that an LLC’s name contain either the term “Limited Liability Company” or an abbreviation for the term. Certain words will be forbidden, like those that would be used to name a government agency (CIA, Treasury, etc.) or those that reference specific licensing (bank, lawyer, etc.) which is not present.
While your name must only be unique in New York, you don’t want to use a name that is confusing when typed into a search engine. It can be useful to see if a domain name, social media handles, and other common identifiers are available for your chosen name. If not, customers may have a hard time finding you or even end up working with a competitor from another state.
Reserving a name in New York
If you have identified the perfect name for your LLC but aren’t ready to file, you can reserve the name for 60 days. This prevents other people from using the same name during that time frame. There is a $20 fee to complete this reservation.
You can file a name reservation in New York for 60 days.
Select a registered agent
In New York, the designated point of contact for every LLC is the New York Department of State. If your business is sued, it is this department that will accept your legal documents and forward them to the LLC. For this to happen, all LLCs must provide a name and mailing address to the state to ensure that documents are properly sent.
There is no requirement for a registered agent to be in place, but many LLCs will choose to appoint one. In this case, the registered agent will be an additional person or entity who receives the service of process on behalf of an LLC.
If you choose to appoint a registered agent, it can be a person like yourself, an employee, or a loved one who is over 18 and has an address in New York (not a P.O. box). This person must also be available to receive documents during all regular business hours. To ensure availability, a registered agent can also be an entity or business that provides registered agent services. For a small fee, these services guarantee availability and receive documents on behalf of businesses.
File Articles of Organization
An LLC is officially established in New York when the Articles of Organization have been completed, submitted, and approved. The DOS-1336 Form in New York is used to complete this document and includes all basic information about your business. The form is very straightforward and will ask for the following information:
- Your LLC’s name
- The county where the LLC is located
- Forwarding address for legal documents
- Signature of the LLC’s organizers
- Name and address of the person forming the LLC
Once these have been filed, the department will review the documents. If they are approved, then your LLC is officially a business in New York.
You can fill out and submit your LLC formation documents here.
There is a non-refundable fee of $200 required in order to file your Articles of Organization.
New York processing time
If Articles of Organization are submitted online, they can be approved immediately with no further processing time required. For those submitted by mail, the expected turnaround time is 3 to 5 business days.
Publish Articles of Organization
New York requires that LLCs publish notice of their formation in two newspapers within 120 days of the business’s effective date. This notice will consist of either a copy of the Articles of Formation or a notice related to them. The county clerk, where the LLC is located, designates which newspapers can be used.
Once the publishing has happened, each newspaper will provide an affidavit of publication. These can then be submitted to the Department of State to finalize formation.
Create an LLC operating agreement
Within 90 days of filing Articles of Organization, an LLC in New York must adopt an operating agreement. This legal document will outline the ways that the LLC will conduct business in an accessible document that can be used to settle any future conflicts.
This agreement does not need to be filed with the state of New York, though they can ask for proof that it exists. However, in the absence of an agreement, any conflict will be settled with default state law, rather than what the members of the LLC wish to happen.
There is no one version of an operating agreement that every business must use. Most LLCs will be covered by a simple online template, though attorneys can be used in more complex cases. In general, the operating agreement should include:
- Basic information like the LLC’s name, address, duration, registered agent, and purpose
- Members’ names, contributions, and ownership stake
- Distribution of profits and losses
- Process for onboarding and offboarding members
- The management structure of the LLC
- Indemnification and liability clauses
After all the members have signed the operating agreement, it can be kept on file for use by the company.
After all the documents have been submitted and approved, New York will issue a certificate that confirms the existence of the LLC. This certificate allows you to move forward with running your business, including some of the important next steps that help you avoid a loss of good standing.
Get your EIN
The Internal Revenue Service (IRS) assigns nine-digit identification numbers to businesses as a way of managing taxes at the federal level. This number, called an Employer Identification Number or EIN, is the equivalent of a Social Security Number for a business. Most LLCs will be required to have an EIN in place, though those with no employees and no excise taxes may be exempt.
Whether there is a requirement or not, businesses should all file for an EIN. The number is free and easy to obtain through the IRS website and may be required for things like opening a bank account or credit card on behalf of a business. Additionally, an EIN can be used on paperwork for customers and vendors in place of a personal Social Security Number, making it a more secure option.
Once a business has an EIN, it must also register through the New York State Department of Labor The state issues a Sales Tax Number, which acts as an EIN at the state level.
You can get your EIN by visiting the IRS website.
Get New York business licenses
The type of business licenses your LLC needs will vary in New York. The most common state-level requirement is a Certificate of Authority, which is similar to a seller’s permit and allows businesses to collect and pay the applicable sales tax for goods and services. There are some other categories of general requirements, like a General Vendor license for vendors without a retail location.
Businesses that provide professional services must also obtain a professional license. The New York Office of Professions maintains a list of licensed professionals that fall into this category.
Cities and counties within the state may have other requirements for licensing. New York City itself has a large ecosystem of permits, licenses, and registrations that may be required. The best thing to do is check with the town, city, and county where your LLC is registered to determine what they will require you to have in place.
Open business bank accounts
One of the biggest benefits of an LLC structure is the personal asset protection it can offer the members. Because it is a legal entity, the owner of an LLC is not held liable for lawsuits and obligations of the business. However, if it is found that the owner is mingling their personal finances with those of the LLC, it can do something called to pierce the corporate veil, which removes these protections. To avoid this happening, you will need to be able to demonstrate separate finances for the LLC.
A business checking account is a simple way to do this. By sending all income and expenses through the account, you can demonstrate that finances are being handled correctly. In addition to these protections, a separate checking account can also make accounting and filing taxes simpler. If you choose, you can also have credit cards and savings account in the name of your LLC.
Review LLC tax rules in New York
LLCs in New York have the ability to act as pass-through entities, meaning that federal taxes and state taxes are passed through the LLC itself and are filed on the owner’s personal tax return.
However, New York does impose an annual filing fee on both single-member LLCs and multi-member LLCs. The exact amount of this fee varies based on the gross income sourced from New York in the preceding tax year, ranging from $25 to $4,500.
Some may be exempt from this LLC tax if there is no income, gain, loss, or deduction from New York.
File an annual report
New York does not require LLC owners to file annual reports but instead asks for a biennial report. This report, sometimes called a Statement of Information in other states, primarily covers the forwarding address used for the LLC. There is a $9 for this filing, which must be completed every two years.
Get insurance for your LLC
Protecting the personal assets of your business is critical as an owner. For that reason, most LLCs will have at least general liability in place to protect against things like third-party bodily injury, property damage, personal injury, and advertising injury claims. Professional liability can also be considered for businesses that provide professional services.
New York requires that any business with employees have workers’ compensation insurance in place. In the case of a work-related accident, injury, or illness, this coverage provides for an employee’s needs.
Additional resources to help you set up a business in New York
The New York Department of State is responsible for the formation and regulation of businesses, including LLCs, in the state. Their website has a number of resources dedicated to helping business owners get started.
What is the New York LLC publication requirement?
Within 120 days of forming an LLC, New York requires that a notice of formation is published. This must happen in two newspapers, one weekly and one daily, for six successive weeks. The newspapers must be in the county of the LLC’s office and the county clerk will decide which newspapers should be used.
How do I show proof of LLC publication requirements?
After publication, the newspapers will provide affidavits of publication. These can be submitted alongside a Certificate of Publication form to the Department of State along with a $50 fee. If this is not completed within 120 days, your LLC will not be considered an official entity within the state.
Do I need to file my operating agreement in New York?
New York requires all LLCs to have an operating agreement in place within 90 days of formation. The agreement does not need to be filed or submitted to the state in any way, though they could ask to see proof of it in some situations. The document will remain internal for future reference as needed.
How much does it cost to form an LLC in New York?
The cost for filing Articles of Organization in New York is $200. Along with this, you must pay $50 to file a Certificate of Publication and any newspaper publishing fees. Publishing fees can be thousands of dollars in places like New York City, and much less in smaller areas.
Does New York require a seller’s permit?
In New York, most businesses will need to register for a Sales Tax Certificate of Authority, which is what other states call a seller’s permit. This allows the state to collect sales tax on any taxable goods and services and registers them for tax purposes. For an LLC, be it manager-managed or member-managed, this typically costs $275 to register.
Do LLCs pay taxes in New York?
While LLC entrepreneurs can act as pass-through entities in New York, the state does impose filing fees on all LLCs. This fee can range from $0 to $4,500 as a percent of income, depending on how much the business has made and if it was sourced in the state. This is in addition to state sales and employer taxes.
Are registered agents required for New York LLCs?
In New York, the Secretary of State is the default registered agent for every LLC. This means no additional registered agent is required. However, businesses can choose to designate someone else and have documents forwarded to that person or entity. Nominating a registered agent is optional, and if none is provided, the state will fill that role.
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