LLC Filing in New York

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A limited liability company (LLC) is a type of business entity that offers the flexibility of a sole proprietorship or partnership along with the personal liability protection of a corporation. It is a creature of state laws, and each state has its own filing requirements.

Under New York LLC laws, forming an LLC is fairly simple, though it requires two separate filings with the New York Department of State. After formation, the LLC must make a biennial filing with the department to maintain its good standing and right to conduct business.

What Is an LLC?

A limited liability company is a type of business structure authorized by all states. It is a hybrid entity that combines some of the best characteristics of a corporation with those of a partnership or sole proprietorship.

Knowing the rules under which LLCs are regulated in one state may not help an individual with forming and maintaining one in another state, including New York. Every state is free to regulate LLCs as they see fit, so the laws are not identical.

In general, formation of an LLC gives the owners of the business – called members under New York law – protection against personal liability for business debts. That means that the individuals that hold an interest in the LLC are not on the hook personally for any debts and obligations of the company. In this way, a limited liability company acts like a corporate structure.

Who Can Be NY LLC Members?

Most state laws do not restrict LLC ownership to individuals, and New York is no exception. A member of a New York LLC can be an individual, a corporation, a partnership, another limited liability company or any other legal entity, even a foreign entity.

How many members can a New York LLC have? One member is enough to form an LLC, and there is no upper limit. In fact, many major companies are formed as LLCs.

LLC Offers Limited Liability

Three major reasons that New York business owners opt to create an LLC are:

  • Limited liability protection.
  • Pass-through federal taxation.
  • Ease of setup.

There are many advantages to selecting a limited liability company as a business entity form in New York, but number one on the list is likely its limited liability protection. This protection is similar to that offered by a corporate business structure; it protects the LLC members from being sued personally for LLC obligations even if the business entity doesn't have enough assets to pay its debts.

LLC Offers Pass-through Taxation

A second major advantage to the formation of a limited liability company is the relatively simple tax treatment of LLC profits. In New York, LLC members are treated as individuals for New York personal income tax purposes, and the corporate franchise tax mimics their federal income tax classification. In whatever way the LLC files its federal taxes, it must file its state taxes.

For individual single members or partnerships, this means pass-through taxation. The profits of the LLC business are assigned to a single member or divided among the individual partnership members, who pay taxes on their share of the profits on an individual level. Pass-through taxation gives the LLC business form an extremely efficient method of dealing with tax liability.

Tax Treatment for Single-Member LLCs

A single-member LLC that is treated as a disregarded entity for federal income tax purposes will be treated as a disregarded entity for New York tax purposes. That means that an individual owner will be taxed as a sole proprietor for New York tax purposes, with all of the income reported on their individual tax return.

Tax Treatment of Partnerships

An LLC that is treated as a partnership for federal income tax purposes will be treated as a partnership for New York tax purposes. The partnership's income is passed through to its partners and is included as income on each partner's income tax or franchise tax return. However, if an LLC is treated as a corporation for federal income tax purposes, it will be treated as a corporation for New York tax purposes.

LLC Offers Ease of Setup

An LLC in New York is quick and easy to set up. Contrasted with setting up a corporation, the LLC involves fewer formalities and less paperwork and doesn't take a lot of time or money. Many individuals do it themselves without getting an attorney involved.

Disadvantages of LLCs

No business structure comes without advantages and disadvantages. One major disadvantage to consider before forming a New York LLC is that the LLC business form makes attracting investment capital more difficult. Corporate owners and managers get new investment capital by issuing and selling additional stock.

Can't an LLC do the same? It can't because an LLC doesn't issue stock. While members can encourage new members to come into the LLC, increasing membership is a much more involved process than issuing stock.

Last, the direct taxation of business profits, while usually easier for members, doesn't work well for all businesses. Corporations often hold back profits for reinvestment, but LLCs can't do that. If the LLC is very successful, its members may find themselves individually assigned more LLC profits than anticipated. These must be reported on their individual tax returns, which can result in high individual tax debt.

Setting Up a NY LLC

The steps in setting up an LLC in New York are quite straight forward, so it is not necessary to hire an attorney to start an LLC. They include:

  • Select a company name for the LLC to operate under.
  • Name a registered agent to receive service of process.
  • File New York Articles of Organization.
  • Follow New York LLC publication requirements to provide notice.
  • Create a New York LLC operating agreement to regulate the business.
  • Obtain an employer identification number (EIN) from the Internal Revenue Service (IRS).

LLC Name Search

Selecting a business name is a bit more complex in New York than it sounds, but it isn't difficult. There are simply a number of rules about the name of the LLC that is chosen. The selected name:

  • Must be distinguishable from the names of other LLCs.
  • Must be different from names of individuals and other businesses.
  • Cannot include words that make it look like a government agency.
  • Cannot include words like "bank" or "attorney," absent proof of a licensed professional who is a member.
  • Must include the phrase “limited liability company,” or one of its abbreviations (LLC or L.L.C.).

Select a Registered Agent

A registered agent in New York is someone who is authorized to receive service of process (legal papers) in case the LLC is sued. They are also the point person for receiving documents from the state and federal government regarding the LLC. Any member of the LLC can be selected, but a third party can also be chosen. Some companies specialize in serving in this capacity.

If an LLC doesn't select a registered agent, the New York Secretary of State acts as the registered agent for all New York LLCs by default. Some LLCs prefer to hire a registered agent service since New York's LLC publication requirements mandate that your principal LLC address be publicly shared.

New York LLC Operating Agreement

All New York LLCs must create an operating agreement, either verbal or written. This is a legal document that outlines the ownership and operating procedures of an LLC.

This type of agreement is intended to make certain that all members are on the same page at the beginning of the business. The idea is to limit conflict between LLC members once the LLC is launched.

File Articles of Organization

The first filing required for New York LLCs is filing the LLC's Articles of Organization with the New York Department of State. What goes into these articles? They must contain at least the:

  • LLC name.
  • Location of LLC principal office.
  • Service of process address.
  • Name and address of registered agent.
  • Management structure.
  • Effective date and dissolution date.

The New York Department of State provides a preprinted form of LLC Articles of Incorporation that can be downloaded, completed and filed. It is possible, and perhaps easier, to use the feature on the DOS website called "Application for Articles of Organization." There is a filing fee of $200 to be submitted with the articles.

Follow Publication Requirements

New York imposes publication requirements as part of the LLC creation process. The publication requirement mandates that, within 120 days of formation, LLC members must publish a notice of LLC formation in two newspapers for six successive weeks. One newspaper must be a daily, the other a weekly, and both must be in the county of the LLC's principal office or designated registered agent's office.

The newspapers selected must be among those approved by the local county clerk of the county designated as the principal office location in the Articles of Organization. Once publication is completed, the publisher of each newspaper provides an affidavit of publication.

These affidavits must be submitted, along with a formal certificate of publication, to the New York Department of State, Division of Corporations. This can also be done online and involves a fee of somewhat less than $50.

Get a New York LLC EIN

EIN stands for Employer Identification Number, a nine-digit number assigned by the Internal Revenue Service (IRS) to help identify businesses for a variety of tax purposes. It is like a Social Security number but used to identify businesses. It is also referred to as a Federal Employer Identification Number (FEIN).

Anyone wishing to start up an LLC business needs an EIN to conduct business-related activities like open a bank account or hire employees. It is also necessary in order to file federal and state taxes. Even someone who already has an EIN for a sole proprietorship needs to get a new one if they are converting to an LLC. EINs are available free from the IRS, online or by mail.

File a Biennial Statement

All New York LLCs are required to file a biennial (every two years) statement with the NewYork Department of State. This statement informs the secretary of state of the address of record for the LLC. In case a lawsuit is filed against the LLC and served on the New York Secretary of State, the documents are forwarded to the address noted in the biennial statement.

The biennial statement must be filed in the calendar month that the domestic LLC filed its Articles of Organization. The filing fee for the biennial statement is $9.