New York is a world-famous center of business and industry. If you want to start a business there, you may have noticed that New York has a lot of rules. Some of them might seem confusing or even downright arcane. If you are wondering where to start, you’ve come to the right place.
This article will outline the basics of how to start an LLC in New York. We’ll use plain English and outline the steps in an easy-to-follow format.
Read on for all the information you need, including:
- Tips on drafting and filing the documents you need for your New York LLC formation
- Guidelines for staying within state and federal law
- The actual laws and rules you need to follow
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Step 1: Name Your New York LLC
Before you go into business, you have to think of a good name for your company. While you have a lot of freedom in picking a name, New York’s Limited Liability Company Law section 204 sets down some basic rules you must follow.
Words You Have to Use
As with many other states, your LLC name must contain the words “Limited Liability Company” or an abbreviation of that term (“L.L.C.” or “LLC”). Section 204(b) also requires you to add words to make it clear that your name is different from the actual and DBA names of other companies doing business in New York.
Let’s say you want to open a business called “Thomas’s Manhattan Pizza, LLC.” When you search the businesses registered in New York, however, you find another LLC called “Thomas Manhattan Pizza, LLC.” In this case, you will have to add words to your LLC name to make it more different from the existing business.
Words You Can’t Use
Once you have a good name for your company and it’s different from any other company’s name, you have to make sure that you aren’t using words prohibited by New York Law. Section 204, subsections (e)-(i) contain a lengthy list of words your company cannot use. Check the statute for the exact words.
In general, do not use words that imply your LLC is:
- Police or other law enforcement
- A trade organization or a chamber of commerce
- An urban developer
- Another kind of entity (e.g., a corporation)
- A guaranty company
- A bank
- A law firm
- A medical practice
- An insurance company or underwriter
- A company that provides services for the disabled
- A securities exchange
- A school
Keep in mind these are broad rules. You should check Section 204 to see whether your name complies.
Also, keep in mind that some of these words will be allowed if you get prior permission from the New York state agency that regulates your business. (Section 204 will tell you if this is possible.)
The big rule is this: if you need a license to do your job, double-check with the Department of State to make sure your company name complies with the law. Also, if there is a government agency that licenses your business, you must consult them about your New York business name as well. You might even need to get prior written permission.
Research the LLC Name You Want
To figure out whether you can get the name you want, you need to research the companies currently doing business in New York. You can pay the Department of State to conduct a name availability search for $5. Written requests should go to:
Department of State
Division of Corporations
One Commerce Plaza
99 Washington Avenue
Albany, NY 12231
If you pay the office to search for a name, you should also pay the extra $20 to reserve that name for 60 days. But there is an easier, cheaper way to do this. The Department of State has a free public inquiry page on its website that you can use to do your own research.
When you search names, make sure you look not just at LLC names but also corporations and partnerships, as your LLC’s name must be distinct from those as well.
Get a Matching Domain
Once you settle on an LLC name, we recommend you get a matching domain, even if you don’t have immediate plans for a website.
Competitors can buy your perfect domain and its variations to block you from using them.
Domain squatters sift through public records of newly registered LLCs and will buy their matching URLs, only to relist them with huge markups.
A domain name from GoDaddy.com or a similar registrar will cost you between $20 and $50 per year, with regular specials and sales where you can get large discounts.
It pays to check now.
Once you have your domain name, you can also create a branded email address through GoDaddy.
New York DBA: Using an Assumed Business Name
Section 204(c) of the Limited Liability Company Law requires your LLC to use its actual business name unless you file for a DBA or assumed business name with the Department of State. You might want a DBA because it is easier to remember than your LLC’s legal name. It might also clarify who owns your company.
Whatever your reason is, getting a DBA is a very common process. It’s not difficult to do, either. The DBA rules are contained in Section 130 of the General Business Law. Note that the Department of State will not approve a DBA that is designed to get around the naming laws discussed above.
Once you have decided on a DBA name, you have to file a certificate with the Secretary of State’s office. The certificate can be signed by either a member of the LLC or another authorized person (like a lawyer).
The DBA certificate must contain:
- Your DBA name
- The LLC’s name
- The street address of your LLC’s main place of business
- The street address of each place your LLC conducts business in New York
- A list of every county in which your LLC does business (or intends to do business)
Finally, keep in mind that there is a $25 filing fee for DBA certificates. For your convenience, the Department of State offers a fill-in-the-blank form on its website.
Step 2: Appoint a Registered Agent for Your LLC
A registered agent is a person or company that an LLC chooses to be its point of contact with the world. If someone needs to get mail or service of process to an LLC, the registered agent is the point person.
Service of process is a legal term for business letters or legal papers.
In other words, if your LLC is sued, the registered agent gets the paperwork and sends it on to you. Agents are vital. If people suing your LLC can’t find your agent, they could get a judge to award a default judgment against your company. That means that you don’t participate in the case, and the judge rules against you without a trial.
New York has some unique laws for LLC registered agents. Section 301 of the Limited Liability Company Law requires that LLC designate the New York Secretary of State as one registered agent. Section 302 then permits your LLC to designate another registered agent of your choosing.
Given this unique setup, you may be questioning why you need a registered agent at all. After all, isn’t the state doing it for you? The truth is that it still makes financial and business sense to designate a registered agent, in particular a registered agent company, for your LLC.
Hiring a Registered Agent Can Save Money on Formation Costs
The financial reasons for designating an agent are unique to New York. Shortly after you form your LLC, Section 206 of the Limited Liability Company Law requires you to publish notices of the formation. Those notices must be in newspapers where your LLC’s office is.
But, if you retain a registered agent company, you can use that company’s address for your notices. That means that if your New York City LLC has an agent in upstate New York, you’ll end up paying a lot less for those notices than you would in one of the NYC boroughs.
If your business is located in New York City, you could save between $1000 and $1500 on the newspaper notices. That kind of money would more than pay for the costs of hiring a registered agent for several years.
Hiring a Registered Agent is a Smart Business Decision
Maybe your LLC isn’t based in New York City, and you still are not convinced that you need to hire an agent. You’ve already shelled out a lot of money to start your business. You may be wondering why you should incur this cost.
You may be tempted to be your own registered agent because:
- It’s cheap: You’re not paying someone for something you can do yourself.
- It’s simple: The only address and contact information you have to keep current is your own.
- It’s reliable: You will receive all important papers personally.
Before you make that call, though, think about some of the consequences of being your own New York registered agent:
- No privacy: Your name and address will be published on the Division of Corporations website.
- Junk mail/spam: You will get a ton of junk mail in addition to a small amount of real mail and any service of process.
- No breaks: Agents must be open for service during all business hours. They don’t get time off.
- Business interruptions: If your agency address is the same as your business address, your clients may be interrupted by people serving lawsuits. That could be embarrassing or hurt your reputation.
- It’s your fault if you miss something: You always have to make sure your agency address is correct and up to date. If you make a mistake or miss something, that’s on you.
Registered agent companies will help you avoid these pitfalls. What’s more, the agent’s name and address are listed on the Internet instead of yours, so you have more privacy. They aren’t pricey, either. They usually cost around $100 per year. Think of that money as paying for your peace of mind, and the cost is very reasonable.
Registered agents are not something that you will use every day, but when you need them, they must be reliable. Spending the money to hire a company is just a good business decision.
If you are looking for a professional registered agent service, take a look at our Best Registered Agent ranking for some of our recommendations.
One other thing: if your company does business in multiple states and needs to register as a foreign LLC, hiring a registered agent service is even a better decision. Just find a company that does business in all those states, pay them a single fee for multiple agents and offices, then let them worry about the details.
Step 3: File Your New York LLC Articles of Organization
Once you have a name and you’ve arranged a New York registered agent, you’re ready to take the biggest step: filing your articles of organization. This legal document is what creates your LLC. Section 203 of the Limited Liability Company Law states that, once you sign and file the articles, your LLC is formed and can legally do business in New York.
If you would like to avoid the hassle of handling your LLC filing yourself, you can also use a professional LLC formation service. Check out our Best LLC formation services article for some of our suggestions.
What to include in my New York Articles of Organization?
Section 203(e) tells you everything that needs to be in your LLC’s articles of organization:
- Your LLC’s name
- The county where your LLC’s office is located (or its main office, if there is more than one)
- If you want the LLC to end by a certain day, and what day that is
- A designation of the Secretary of State as agent for your LLC, along with an address (including an e-mail address, if you like) to which the Secretary of State’s office should send anything it receives
- The name and address of any registered agent designated by the LLC
- If the members of your LLC have decided to be personally liable for any debts of the company under Section 609 of the Limited Liability Company Law, a statement to that effect
- Any other legal provisions — the three examples included in the statute are:
- The LLC’s business purpose
- Any limitations on members’ or manager’s authority
- Any things that must be included in the LLC’s operating agreement
If you just want something basic that will get the job done, the Department of State has a simple fill-in-the-blank form you can use.
New York LLC Filing Fee
The New York Department of State says that filing articles of organization for an LLC will cost $200. Within 120 days of the filing of your articles, you will also have to file a certificate showing that you have published the newspaper notices required by Section 206. The filing fee for that certificate is $50.
Read More: How Much Does It Cost to Form an LLC in New York
New York LLC Processing Time
The Department of State website says that the average processing time for articles of organization is seven business days. If you need your articles processed more quickly, the Department of State offers three tiers of expedited processing.
The expedited processing speeds, along with their costs, are:
- Within 24 hours: $25
- Same day: $75
- 2 hours: $150
Step 4: Draft your New York LLC Operating Agreement
New York LLCs must have a written operating agreement. An LLC operating agreement is a contract that states the rules of your company. It binds all the members and managers of the LLC, giving them both powers to bind the company as well as responsibilities to the company and the other LLC members.
Good operating agreements should be designed like a user’s manual for your LLC. You should think about different situations or problems that could arise in business and how you want to handle them. (For example, what happens if someone quits? What if you add a new member?) The better you plan, the more useful your contract will be.
Section 417 of the Limited Liability Company Law is rare among state laws because it requires a written agreement. Though you don’t have to do it at the same time as your articles of organization, you must have it completed and signed within 90 days of filing your articles. You do not have to file your LLC operating agreement.
New York law does not specifically require many things in the agreement, so you can customize it as you wish. The statute lists the following topics for the contract:
- The business of your LLC
- How to “conduct affairs” for the LLC (e.g., signing contracts, bank accounts, etc.)
- The rights and duties of specific members, managers, or other people relating to the company
You shouldn’t stop there. Your operating agreement is a vital part of your LLC. It’s a good idea to include as much detail as you can when drafting it.
Most good operating agreements do some or all of the following things:
- They determine the rights and duties of LLC members. If one LLC member is responsible for running the business or managing the books, the operating agreement should say so.
- They say whether the LLC has a member or non-member manager and what the manager has the right to do. Managers also have special duties to the company and the members. The operating agreement should state these.
- They outline what the LLC is legally able to do. The operating agreement should also set down how the company is allowed to conduct its business from day to day.
- They say how new members can join the company. They also have rules about how exiting members can leave.
- They set down how and when profits are paid to members. They can also create different types of membership and payment schemes.
- They say whether members or managers are in charge. They also say how to hire and fire managers.
- They say how and under what circumstances the LLC should end. You might not want to dissolve your business now, but you might in the future. It’s best to think about it and plan before it becomes an issue.
- They say how to change the rules. You may need to amend your operating agreement in the future. The operating agreement should set down the rules for making changes.
Step 5: Fulfill New York’s LLC Publication Requirement
New York is one of a handful of states that requires new LLCs to publish a notice of their formation in two local newspapers.
This rule is a bit of a throwback to a pre-Internet age when the only way the public could learn about new companies was the local paper. The New York LLC publication requirement also prevents you from forming companies in secret to hide assets from a spouse or creditor. In any case, it’s an ancient rule that does not have a lot of use today.
Under Section 206 of the Limited Liability Company Law, you have 120 days after the filing of your articles of organization to complete this step. You can do it yourself, through an attorney, or with a registered agent company.
- Do it yourself: This is the cheapest option. You call the county clerk of the county where you do business (or where your registered agent’s office is), and they give you the two papers where you need to publish notices. It’s not hard, but it can be a hassle.
- Do it through an attorney: This is the most expensive option, and attorney fees can run hundreds of dollars for a single hour of their time. The process will be very smooth, but the cost is much too high.
- Do it through a registered agent: Some registered agents companies will do this for you. They generally charge less than $200 for the service and take care of it in the same way as a lawyer. This is a smart, efficient decision.
The actual cost of the publishing will vary wildly from county to county. If your LLC is in Albany, for example, you’ll probably pay between $150 and $200 for the publication. In New York City, though, you could pay as much as $1500 in publication costs for the same service.
This price issue is the exact reason many New York LLCs hire registered agents in less-expensive counties. Your New York City LLC could hire an agent in Albany, which then publishes in that county and saves you over $1000 in publishing fees. This makes hiring a registered agent in a less expensive county a wise choice.
Keep in mind that, once the publication is done, you or your agent will have to file a certificate with the Secretary of State. (A form statement is included in the text of Section 102 of the Limited Liability Company Law.) The filing fee for that affidavit is $50.
Step 6: Get an EIN (Employer Identification Number) for Your New York LLC
When you pay your federal income tax, the IRS identifies you with your social security number. An EIN is like a social security number for your LLC. They help the IRS identify and track your company for federal tax purposes.
Not every LLC needs an EIN, though. Here are the most common times when you need an EIN:
- Does your LLC have more than one member?
- Does your LLC have any employees?
- Is your LLC taxed as a C corporation or S corporation?
If the answer to any of the above questions is yes, you need an EIN for your company. Also, keep in mind that most banks will require an EIN for your LLC to open an account.
Fortunately, getting an EIN is easy. Just visit the IRS’s website, where you can apply online. The entire process will take around five minutes. Alternatively, you can also file IRS form SS-4 via mail or fax.
You should never pay anyone to get an EIN for you unless they are doing it as part of a more complete service package.
Read More: How to Get an Employer Identification Number in New York
First Tasks After Registering Your New York LLC
Between the articles of organization, your affidavit of publication, and the operating agreement, it took a lot of work to get your LLC formed. Good job! But you’re not done yet. Now that you have a fully formed company, you still need to take care of some other tasks if you want to make your business successful.
Open a Business Bank Account
You must get a separate bank account for your new LLC. Spending a couple of hours at the bank is likely the last thing you want to do, but you need to do it for a few key reasons.
- Accounting: You’re doing this to make money. You can’t tell if you’re making money unless you know how much your company spends and makes every month.
- Credit: Even successful companies need to borrow money. You don’t want to use your own credit, though, for a business expense. Keeping your company’s money separate helps build up company credit that it can use for its own purposes.
- Personal Asset Protection: Keeping your own money separate is the whole point of even forming an LLC. Without a business bank account, you risk losing that protection.
Mixing business funds with personal funds is a bad idea. Banks prepare account statements every month that you should review and import into your business books. If your LLC’s money is tied up with your personal money, though, you can’t keep accurate books. And if you don’t have those, your business is in financial danger.
Also, there is an important legal reason to separate business from personal funds. As an LLC member, you are protected by something lawyers call the corporate veil. Because you and your LLC are different legal entities, you can’t lose your personal assets if the company gets sued or goes bankrupt.
However, there is a big caveat. The corporate veil only works if you keep your business and personal assets separate. If you mingle the funds or start using the business assets for yourself, you might lose the legal protection of your LLC.
Of course, liability protection is one of the main reasons for forming an LLC in the first place. So, make sure you get a separate bank account as soon as possible.
Get Business Insurance For Your New York LLC
You protect your home, car, and other investments with various insurance policies. Your business is no different. Make sure you get the right coverage before the worst happens. Here are some common types of insurance policies you will want to consider:
- General liability insurance: You’ll need this if there's an injury on your property. It pays for damages and a lawyer if you need one.
- Commercial automobile insurance: This works like your own car insurance. It covers drivers and cars for your business.
- Workers compensation insurance: New York laws (PDF) require workers’ compensation coverage for all employees, even part-time employees. If your business is owned by one person and you have no employees, you may not have to purchase coverage.
- Commercial property insurance: This protects your property in the event of damage. Keep in mind that flood insurance is often a separate policy.
- Professional liability insurance: Lawyers, doctors, architects, and other professionals need this insurance. It provides coverage and legal defense in the event of a malpractice case.
- Business income insurance: If you have to close for some time, business income insurance can pay back the loss of income. Policies vary, though. Make sure that you know exactly what kinds of losses will be covered.
Keep Your New York Company Compliant
Getting your business off the ground and setting everything up can be draining. And when you’re done, you have a company to run! The good news is that the hardest part is out of the way. Now, you just need to be mindful of a few things that will pop up every once in a while. Set some reminders in your calendar for these items.
New York Business Permits and Licenses
If your LLC is going to sell goods or services subject to sales tax (and it most likely will), then you are going to need a Certificate of Authority from the New York State Department of Taxation and Finance. This is a document that lets you collect sales tax from your customers, and you must get it before you start doing business.
Remember that many types of businesses also need professional licenses to operate in New York. If you are unsure what type of business license you need for your LLC, use the New York state website’s checklist to point you in the right direction.
Finally, keep in mind that you may need city or county permits for your business. New York City, for example, has a long list of required licenses and permits for its businesses. Other local governments will probably not have as many rules, but you still need to check to make sure you are compliant.
New York Tax Requirements
If your business has any employees, you will have to register with the state and pay New York’s employment taxes.
For income tax, an LLC is treated as a pass-through entity and does not pay taxes directly on its income. The income is passed to the members, who then pay taxes on their personal income.
Depending on whether your LLC is set up for tax treatment as a sole proprietorship, partnership, or corporation, you will have to file different tax documents with the state. Confirm with an accountant whether you need to file a partnership return (PDF) or corporation franchise tax return.
In some cases, your LLC may also have to pay a filing fee or estimated income tax on behalf of certain members.
Federal LLC Tax Filing Requirements
Your LLC is also considered a pass-through entity for federal tax purposes. Profits or losses from your LLC should be on Schedule C of your personal tax return.
Biennial Statement and Other Filing Requirements
Section 301 of the Limited Liability Company Law requires your LLC to file a statement with the Secretary of State every two years. This short biennial statement is due in the month that your LLC was formed. It just consists of a post office address to which the Secretary of State’s office should mail any service of process it receives for your LLC.
You can skip filing this separate statement if you get an agreement from both the Secretary of State and the Department of Taxation to let you put the information in the first paragraph of your LLC’s annual tax reports. These reports must be filed with certain state-approved software. Speak with your accountant for further details.
New York Business Formation Quick Links
- IRS — apply for an EIN online
- IRS information regarding the federal tax treatment of LLCs
- New York City — License and Permit Index
- New York Department of State — Corporation and Business Entity Database (Public Inquiry)
- New York Department of State — Fee Schedules
- New York Department of State — Filing a Certificate of Publication for an LLC
- New York Department of State — Filing Information for Articles of Organization
- New York Department of State — Form Articles of Organization
- New York Department of State — Form DBA Certificate
- New York Department of Taxation and Finance — Register as a Sales Tax Vendor (Certificate of Authority)
- New York Department of Taxation and Finance — Tax Reports
- New York Employers’ Guide to Workers’ Compensation
- New York Employer Registration
- New York General Business Law Section 130 (DBAs/Assumed Names)
- New York Limited Liability Company Law
- New York Professional Licensing
- New York Professional Licensing — Checklist to Determine Which Regulations Apply to Your Business
New York LLC FAQs
How much does it cost to start a New York LLC?
The total cost to the state is $250. This includes the filing fee for your articles of organization and the filing fee for your certificate of publication. You will also have to pay fees for publishing the notice of your LLC’s formation, but this will be determined by the newspapers in which you publish.
What is the processing time to form my New York LLC?
Processing time is seven business days. You can expedite the processing time to as little as two hours for an additional fee.
What are the benefits of a New York LLC?
A New York LLC protects your personal assets while giving you favorable tax treatment. The required operating agreement also gives you the maximum flexibility in designing a business structure that works best for your needs.
Where do I check if my New York LLC name is available?
You can pay the Department of State $5 to search for a name, or you can do it for free on their website. Paying the state to do it only makes sense if you plan on reserving the name (for an extra $20 state fee) to use within 60 days.
Thank You For This Wealth Of Knowledge.