New York is a globally recognized business and industrial center. You may have observed that New York has a lot of laws if you wish to start a business there. Some of them may appear puzzling, right? You’ve come to the perfect place if you’re not sure where to begin. This article will cover the fundamentals of how to start an LLC in New York.
It’s not easy to form an LLC in New York, but it is possible. Everything we know will be shared with you. Why? You’re a business owner. Instead of struggling through paperwork or, overspending on publication fees, you should be out there creating your vision a reality.
A New York LLC is a corporate entity that combines the restricted liability of a New York company with more flexible ownership, administration, and taxation options than a New York corporation. If you want more information on how to form an LLC in any state, you can read our guide on How to Form An Limited Liability Company
To incorporate an LLC in New York, you must conform to particular regulations depending on the location of your company. This article will show you how to form an LLC in the state of New York and in the city of New York. Follow the steps below to get the liability protection and other advantages that limited liability organizations provide for your company.
Before we start, here are the top picks for LLC filing companies in New York:
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What Are The Benefits Of Forming An LLC In New York?
One of the most significant decisions you’ll make when launching a business in New York is the entity structure to use. If you combine the flexibility of a sole proprietorship with the basic protections of a corporation, you might consider forming an LLC, or limited liability company. Many freelancers and entrepreneurs prefer the LLC because it protects them from legal liability to the company’s liabilities and debts.
If you want to start an LLC in Texas, read our guide on How To Form An LLC In Texas
Before forming a New York limited liability company, or LLC, you should consider the advantages and disadvantages of forming a New York LLC vs other corporate structures. Here are the factors you must consider before structuring a business:
1. Pass-through Taxation
Profits from a New York LLC pass immediately to the owners, who subsequently declare their share on their personal tax returns. Pass-through taxation can be termed when earnings are only taxable once and the company is not taxed directly.
Income from a New York C company is liable to “double taxation.” Earnings are paid before being distributed to owners, and profits are taxed again when owners declare their part of the profits on their personal tax returns.
2. Less Complex
LLCs are simple to incorporate and maintain, involving little paperwork and cost. New York LLCs, unlike C corporations, are not obliged to designate formal officer duties, have annual meetings, adopt bylaws, or keep track of company records and decisions. Articles of incorporation must be filed with the New York Department of State, Division of Corporations, in order to incorporate a limited liability company in New York. An LLC is not required to hold annual meetings or maintain technical aspects in the same way that a corporation is.
3. Tax Options
An LLC has the most greater flexibility in terms of how it will be treated under federal law. A single-member LLC (also known as a single-member LLC) can be taxed as a sole proprietorship, an S corporation, or a C corporation. A multiple-member LLC can opt to be taxable as a partnership, an S company, or a C corporation. The decision will be based on a number of criteria and should be made in collaboration with a tax specialist.
4. Increased Reliability
Creating a limited liability company (LLC) gives your business more authority. A limited liability company (LLC) is considered a more formal corporate structure than a sole proprietorship or a partnership. Customers and clients will identify you as a respectable company if you include LLCs in your company name.
5. Limited Liability Protection
An LLC’s owners are not personally accountable for the company’s debts, including debts incurred as a consequence of most actions filed against it. This means that a corporate creditor cannot seize an LLC member’s personal possessions such as a house, car, bank accounts, etc.
Limited liability is provided by both a company and a limited liability partnership (LLP), but the LLC has additional benefits. The limited partners of a limited partnership (LP) have limited responsibility, while the general partners, who construct and administer the business, do not. A sole entrepreneur or a general partnership partner has no restriction on their liabilities.
6. Unique Name Registration
When starting an LLC, you’ll select a catchy title that will be registered once the company is incorporated. Neither any companies in New York will be allowed to use your name while your company is functioning if you register it.
Also Read Our Guide On How To Register A Company Name In USA?
The business name for a sole proprietorship must be the name of the shareholder(s). To use a name other than their own, a sole proprietor or partnership will need to file a doing business as name (DBA).
7. Flexible Ownership
People who appreciate rules, procedures, and prestige belong in corporations. LLCs are for individuals who prefer to be in charge. You are not obligated to shareholders or a board of directors when you form a New York LLC, and you could have as many executives or partners as you prefer.
A New York LLC’s ownership and management can be structured in a variety of ways, with only a few exceptions:
- You can create a single LLC or a multi-member LLC
- Members can control a Multi-Member LLC, which is referred to as member-managed
- Manager-managed LLCs are those that are administered by a manager who is elected by the owners
8. Ability To Raise Capital
It is easier to raise capital in LLC compared to a sole proprietorship or general partnership. Although neither of these other types of businesses can accept shareholders without making them partners, an LLC can accept new members without giving them full control over management.
Additional information is available in the New York Department of State’s Division of Corporations to assist you in determining the best approach to structure your company. You might also choose to use an online services provider to ensure that your company registration goes smoothly.
Disadvantages Of Starting An LLC In New York
Although LLCs have many advantages, there are specific situations when forming a New York corporation or sole proprietorship can cause difficulties:
- Like sole proprietorships, LLCs are pass-through businesses, and LLC owners must pay taxes on their portion of the LLC’s net income, whether or not they get a payout.
- A limited liability company (LLC) typically costs more to establish and operate than a sole proprietorship or general partnership.
Steps For How To Start An LLC In New York
LLCs are the most common business structure because they are affordable to set up, give owners flexibility, and are simple to manage. Forming an LLC legally establishes your company, restricts your liability protection and allows you to take advantage of tax benefits. Here is our step-by-step guide on how to start an LLC in New York to get started today:
1. Choose A Name For Your New York LLC
The first and most crucial step in forming an LLC in New York is deciding on a name. Make sure your name conforms with New York’s naming guidelines and is easily searchable by prospective consumers. When you submit your Articles of Organization, you must provide your company with a distinct name that is distinctive from any other registered name in New York.
The names must comply with New York’s naming guidelines. The following are major considerations to make:
- The letters Limited Liability Company, LLC, or L.L.C. must appear in your company name.
- Your company name must not be similar to that of another company in the state. To see if a specific business name is in use, go to the Secretary of State’s website and run a search. To learn more check NY LLC naming guidelines on the NY Senate website.
- A business name cannot include words that are used to identify a government agency (i.e., State Department, CIA, FBI, Treasury, etc.)
- Additional documentation and licensure papers may be required for certain prohibited words such as bank, lawyer, attorney, credit union, and so on.
Things To Be Considered:
- Availability of URLs: You’ll probably need a webpage even if you don’t think you’ll need one. At the very least, by purchasing your domain name now, you are reserving the option of having one in the future. It’s important to check if the URL is available before choosing an LLC name.
- Name Reservation: You can reserve your LLC name for a specified cost if you aren’t prepared to incorporate it but are concerned that it will be taken by someone else. Names can be registered for up to 60 days in New York by paying a fee and completing the appropriate form to the state government. Check on NY Corporation And Business Entity Database for a name search.
2. Appoint A Registered Agent in New York
A registered agent is required for all LLCs. Your New York LLC’s registered agent is the individual or entity authorized to handle official papers and legal documentation. Even if you employ a registered agent service, the Secretary of State will always be the primary point of contact for the state and anyone who may seek legal action against your LLC.
Read our guide on the Cheapest Registered Agent Services For Startups.
In New York, the Secretary of State automatically acquires your LLC’s registered and principal agent, from whom you will get your incorporation documents and other business-related documentation. When filing online, you can select a different registered agent, such as a New York citizen or another New York LLC. Your LLC must specify a New York street address where it can receive documents, irrespective of who acts as the registered agent.
Moreover, you can hire a company to act as your registered agent which may save you money. For newly formed LLCs it is required to post notices of formation in local newspapers.
A registered agent must meet the following criteria such as:
- Registered agent services must be provided by entities
- The consultant must have a New York address
- During regular business hours, the representative must be on-site and ready to accept documents.
3. Provide An Address To Which Legal Documents Can Be Sent
In New York, every LLC’s “representative for service of processes” is necessarily the New York Department of State. If your LLC is sued, the Division will collect legal papers on its behalf and forward them to your LLC. You must provide the Department of State with a name and address to whom the procedure and other legal paperwork can be delivered. To receive legal documents, it is advised that you appoint a New York resident or a registered agent.
4. File Your New York LLC Articles of Organization
The next step is to design and file your LLC’s articles of organization. Your LLC’s articles of the organization establish it as a legally distinct entity. It contains basic information about your LLC, such as the name of the company, the county in which it is located, the name and address of your registered agent, and the name and address of the filer. According to Section 203 of the Limited Liability Company Law, your LLC is incorporated and can legitimately do business in New York once you sign and file the articles.
The Articles of Organization are a legal document that forms your limited liability company (LLC) by setting up essential data about it. Individuals in New York could use a form (DOS-1336 Form) to file Articles of Organization.
Once you choose a unique business name and have a New York registered agent then you must prepare and file the New York Articles Of Organization. You can apply online, by mail, by fax, or in person.
You’ll generally need the following information to prepare your articles:
- Your company’s name
- The New York county in which the LLC will be registered.
- A New York address to which the LLC’s legal paperwork should be mailed by the Secretary of State.
- Signature of the LLC’s operator
- The Articles must be signed by the person and address that form the LLC.
The secretary of state will review your Articles of Incorporation after you have filed them. The LLC becomes a legitimate business entity once the articles are accepted.
5. New York LLC Publication Requirements
A version of the articles of the organization or a notification connected to the creation of the LLC must be published in two newspapers. These criteria must be met within 120 days of the effective date of the LLC’s articles of organization.
LLCs must promote in publications authorized by the county attorney in which the LLC’s office is situated. The newspaper will submit evidence of publication once it has been published. The New York Department of State shall receive the Certificate of Publication, along with the testimonies of publication. The Certificate of Publication costs $50 to file.
6. Prepare A New York LLC Operating Agreement
An operating agreement is a legal contract that sets out how your limited liability company (LLC) will operate. Members of an LLC must sign an agreement within 90 days of filing the Articles of Organization in New York City. Create an Operating Agreement, which serves as the LLC’s governing document. It establishes the procedures of the LLC’s operation, such as conducting an annual meeting. At your organizational meeting, you will study and adopt the agreement.
The operating agreement is not required to be filed, but it is an important part of your business. Getting a formal operating agreement easily accessible is beneficial for a variety of reasons, including resolving disputes about financial arrangements and other possible lawsuits. All NY LLCs must have an operating agreement that must be verbal or written agreement.
New York LLC does not specifically require many things, but you should include the following topics below:
- Name of the LLC and its primary address
- The duration of the LLC
- The registered agent’s name and address
- Information on the Organization’s Articles of Incorporation
- The goal or objective of your LLC
- Responsibilities of each team member
- The manner in which gains and losses will be distributed
- The procedure for admitting new members and releasing departing members
- The LLC’s management
- Provisions of compensation and liabilities
7. Get An EIN For Your New York LLC
Whenever you file your federal taxes, the IRS uses your social security number to identify you. For your LLC, an EIN is similar to a social security number. For federal tax purposes, they assist the IRS in identifying and tracking your business.
The Internal Revenue Service (IRS) assigns a nine-digit Employer Identification Number (EIN) to your LLC in order to identify it for tax purposes. You can get your EIN from the IRS by mail or online. This nine-digit number is required for any New York LLC with workers or even more than one member. For taxation purposes and financial documentation, such as filing taxes, recruiting new staff, and opening firm bank accounts, an EIN is essential.
When it’s time to do the following, your EIN will actually be useful:
- Open a bank account for your business
- File both federal and state income taxes
- For the need of hiring employees
8. Receive A Certificate From The State
After the LLC’s creation documents are submitted and confirmed, the state will provide you with a certificate confirming the LLC’s formal existence. It can take up to 7 weeks to acquire your certificate.
The LLC will be able to obtain an Employer Identification Number (EIN), business licenses, and a business bank account with the help of this certificate.
9. Comply With Other Tax and Regulatory Requirements
There are other taxes and regulatory requirements that apply to your LLC, which include:
- Employers Identification Number: A federal tax ID, often known as an employer identification number, may be required (EIN). When submitting your business taxes, you’ll need your LLC’s EIN. An EIN is also required when creating a business bank account or seeking business financing. If you’re forming an LLC in New York with employees, you’ll need to obtain an EIN and register with New York’s Labour department. An EIN can be obtained by filling out an online EIN application on the IRS website. No filing fees are required.
- Business Licenses: The State of New York may need you to obtain licenses and permits, depending on the type of your business. Visit the New York Business Express website for more information. Your municipality may also require a local business license. Visit the clerk’s office or municipality where the LLC’s business will be conducted for information on local permits.
- Annually State Filing Cost: An annual filing fee is charged to any domestic or foreign LLC that is classified as a corporation for federal income tax purposes and has any income, gain, loss, or deductions coming from New York sources. The filing service is free for an LLC that elects to be taxed as a company for federal tax purposes. The charge is paid via Form IT-204-LL, Partnership, Limited Liability Company, and Limited Liability Partnership Filing Fee Payment Form, to the Department of Taxation and Finance (often referred to as the Tax Department).
10. Get Business Licenses & Permits
You must obtain the necessary licenses and permits to operate your business properly. The simplest method to manage the wide variety of federal, state, and local regulations is to use the Small Business Administration’s Business License & Permit look-up tool, which allows you to search by business kind and location.
What Are The Next Steps After Forming The New York LLC?
After registering your LLC is formed you are still not done yet! If you want to make your business successful, you need to take care of some other responsibilities now that you have a completely formed entity.
Here are some important steps you need to consider, after forming an LLC:
- Open a business bank account: For your new LLC, you’ll need to open a business bank account. A business bank account lets you keep personal and business costs separate, which is necessary to keep your LLC’s corporate veil intact. In the event that your LLC or business is sued, a corporate veil shields your financial property from lenders.
- Get a business credit card: A company credit card will help you separate personal and business costs while also creating a credit record for your firm.
- Hire a business accountant: An accountant for your business can help you save money on taxes and prevent penalties and fines. Accounting and payroll are made easier with the help of an attorney.
- Get Business Insurance For NY LLC: Risk management is aided by business insurance. General liability, professional liability, and workers’ compensation are the most popular types of business insurance.
Keep Your Company Compliant
- You need to research and get a New York license and permits
- File your New York biennial statement online with the New York Department of State at the end of the month in which the LLC was formed
- In the next step, you need to understand New York sales tax requirements and seller’s permits
- Understand the federal tax requirements to report income to the IRS each year using Form 1065 Partnership Return
If you are allowing the setup process to prevent you from taking this crucial step for your company is a mistake. You’ll take the first step into the business world by forming an LLC in New York. Also, keep in mind that you are not required to complete this process on your own. You can always get legal advice from an attorney or an online professional agency.
After putting in the effort to form your New York LLC, don’t let a missed annual report filing put your startup out of legality. It takes a lot of time and effort to keep track of and file annual reports on your own, and it might lead to mistakes. Protect the good standing of your LLC with Managed Annual Report Service, which tracks and files information in a timely manner, every time, so you can focus on your business.
If you are looking for business formation services we can recommend you to choose Incfile as it files all formation documents on your behalf and provides 1 year of free registered agent services for just $49 plus state filing fees. Ready to start an LLC in NY? We have experts to help you decide the right formation service for your business. If you have any questions feel free to leave them in the comment section below.
Frequently Asked Questions (FAQs)
1. How much does it cost to become an LLC in NY?
The Articles of Organization must be filed with the New York Department of State Division of Corporations for a fee of $200. If you want to reserve your LLC name before submitting the Articles of Organization, it will cost you $20 to file a name reservation application.
2. Do you need a business license for an LLC in NY?
Although there is no general business licence in the state of New York, several cities do require firms to be registered in order to operate. The rules for registering a business differ depending on the location and type of business.
3. How do I start a small business in NY?
If you want to start a business in New York, you need to follow a step by step guide as follows:
1. Select a Business Plan
2. Choose a business name
3. Choose a business entity and register your business
4. Obtain your EIN and register for taxes
5. Obtain permits, licenses, employer information, and insurance
6. Secure startup funding
7. Get a business bank account and business credit card
4. What are the benefits of a New York LLC?
A New York LLC secures your personal belongings while also providing you with tax benefits. The essential operating agreement also allows you to be as productive as possible when creating a business structure that meets your requirements.
5. Do I need an operating agreement for my New York LLC?
Operating agreements are not required in New York for LLCs, but they are strongly recommended. An operating agreement will assist protect your limited liability status, eliminate financial and management disputes, and ensure that you, not state law, choose the rules that govern your company.
6. Do I need to register my business in NY?
The process duration is seven days. For a fee, you can speed up the processing time to very little as two hours.
7. How is an LLC taxed in New York?
The federal income tax category of LLCs and LLPs is followed by the New York personal income tax and corporation franchise tax. For New York tax purposes, an LLC or LLP that is classified as a partnership for federal income tax purposes is taxed as a partnerships.
8. Where do I check if my New York LLC name is available?
You can search for a name for $5 at the Department of State, or you can do it for free on their website. Allowing the authorities to do it makes sense only if you expect to use the name within 60 days after registering it.
9. Do I need a registered agent for my LLC in New York?
Apart from New York, every state in the United States requires all companies and limited liability companies (LLCs) to have a registered agent. In different places, a registered agent may be referred to as a residential agent, a legal agent, or an intermediary for execution of proceedings.
10. How long does it take for an LLC to be approved in NY?
Approval of mail filings for New York LLCs takes four and a half months in total. This includes the 4 month process time as well as the time it takes for your paperwork to arrive in the mail. If you file your documentation during business hours, online filings for New York LLCs are accepted promptly.