New entrepreneurs are excited to launch businesses and bring their inventions and ideas to market.
Forming an entity like an LLC is important to protect your small business and personal assets.
A Limited Liability Company (LLC) is a business structure whose owners are called “members.” The LLC can be organized for any legal business purpose.
In New York State, starting an LLC is simple with a few documents, a waiting period, and paying state filing fees.
The filing process varies by state, so understanding the LLC formation requirements specific to New York will help streamline your process.
Table of contents
- Step 1: Choose a name for your LLC
- Step 2: Hire a registered agent (or be your own)
- Step 3: File the New York LLC articles of organization
- Step 4: Obtain an EIN (Employer Identification Number) from the IRS
- Step 5: Prepare an LLC operating agreement
- Step 6: Complete the New York LLC publication requirement
- Step 7: Open a New York business bank account
- Taxes, costs, and fees in New York for LLC
- Business permits and licenses in New York
- Pros and cons of forming an LLC in New York
- Key takeaways
- Formation FAQs for an LLC in New York
Ready to get started with your LLC? Let’s get going!
1. Choose a name for your LLC
Be flexible when selecting a name in case the name of the LLC you want to use isn’t available.
Some words are restricted and, in some cases, prohibited from being included in your LLC name.
When choosing a name for your LLC, consider searching the New York State Business Entity Database. This database lists businesses, and you can check to see if these existing business names are similar to yours.
Your request may be rejected if it’s found to be not distinguishable from an existing business’s name. Note that the database only provides business names and status updates and doesn’t guarantee that your intended business name is available.
To check if the name you want to use is available, you must submit a request to the New York Division of Corporations, including a $5 fee for each name search request you submit.
The Department of State will confirm whether or not the name you intend to use for your LLC is available. If the state confirms that the LLC name you prefer is available, you can pay an additional fee to reserve the name for 60 days.
For branding and marketing, select a name that easily identifies your business to customers without confusing your business with another. Whatever name you choose, it must end with “Limited Liability Company” or the “LLC” abbreviation.
Some states require LLC members to file a “Doing Business As” or DBA, but this isn’t required in New York. If you choose to operate your business under a name other than the one you selected with your LLC filing, you will need to file a Certificate of Assumed Name in New York State.
2. Hire a registered agent (or be your own)
New York LLCs and any out-of-state LLC that conducts business in New York are required to appoint a registered agent.
Also called a corporate or statutory agent, this individual accepts mail like tax and legal notices on your company’s behalf during normal business hours.
Here are a few examples:
- Federal, state, and local tax notices
- Service of process
- Legal and other official notices
For example, if your company receives a tax notice from the Internal Revenue Service (IRS), this letter will be mailed to your registered agent’s address, which must be physically located in the state where the agent agrees to accept and deliver correspondence for your business.
An agent for service of the process presents another party with a writ, summons, or other legal documents.
By default, the New York Secretary of State serves as the registered agent for new LLCs. If you are a state resident, you can choose to be your own or hire a professional service and use their address to receive important business documents.
Choose a registered agent vs. become one
There are many things to consider when selecting a registered agent service for your LLC.
If you choose to serve as your own and primarily do business from your home, your home address becomes tied to the business, which means that:
- Your home address becomes public information
- You may receive more marketing or junk mail from companies who purchase mailing lists from the Secretary of State
- In the event you are served legal papers, your family, friends, and neighbors may witness this, which can be embarrassing
- Anytime you move, you will have to update your address with the Secretary of State
LLCs that have not appointed a registered agent risk losing their status and the added asset protection that comes with owning an LLC. You may also miss tax and compliance deadlines or not know that your business is being sued.
This could result in added fines or legal consequences that negatively impact your business.
3. File the New York LLC articles of organization
Once your registered agent is identified, the next step is to file Articles of Organization. This document and state filing fee is required to officially create your LLC as a separate entity. It includes your business address, county of operation, owner/member names, and registered agent contact information.
LLC members must file a Biennial Statement every two years for the business to be in good standing. Otherwise, your LLC can’t be suspended from conducting business.
The New York Department of State created a template that the filer can use to provide this information. You may also draft your copy of the Articles of Organization as long as the document provides the same EIN information included in the New York Department of State template.
While not required, it is suggested that LLC members consult an attorney when forming an LLC in New York because the Articles of Organization is a legally binding document that LLC organizers must sign. Most people file online, but your Articles of Organization can also be filed by mail, fax, or in-person at the New York Department of State in Albany, NY.
A company that’s located in New York is considered a domestic New York LLC. Companies formed in states are considered foreign LLCs. A foreign limited liability company can apply to do business in New York State by filing an Application for Authority. A Certificate of Existence from the company’s jurisdiction dated within one year is also required.
4. Obtain an EIN (Employer Identification Number) from the IRS
An Employer Identification Number or EIN is like the social security number for your business. When you open a bank account or apply for business credit, lenders will likely ask for your EIN.
It’s simple to apply online on the IRS website, and your EIN is available immediately for use. When applying for your EIN, you must select a business structure for federal income tax purposes to tell the IRS how you want your LLC to be taxed: as a sole proprietorship if you’re a single-member LLC, or as a corporation for multi-member LLCs.
The sole proprietorship is the most basic tax treatment and doesn’t require additional tax forms since profits and losses from the business are included on the LLC member’s personal tax return.
Choosing to be taxed as an S-corporation provides added benefits where LLC members pay only half of the self-employment tax, but business profits and losses are passed through to the members’ personal tax returns.
Many business owners don’t choose C-corporations because business profits are taxed twice – once when the company pays income taxes on profits and again when distributions are made to shareholders.
One of the requirements of limited liability company law is not to commingle or mix your business and personal transactions.
For example, you should not pay for business items out of your personal checking account or vice versa. This implies that your LLC isn’t truly a separate entity. If you are commingling funds and you get sued, you could lose the added asset protection that an LLC provides, and your personal assets could be at risk of loss in a lawsuit.
Using your EIN to file your business tax returns ensures that your business finances are separated from your personal finances and that you don’t violate the rules that LLC members must follow.
5. Prepare an LLC operating agreement
In New York State, LLC members must create and file their Operating Agreement within 90 days of filing the Articles of Organization. This document governs the LLC by specifying the authority and responsibilities of the members.
The Operating Agreement also outlines how to handle ownership changes and distribute profits and losses amongst members.
The Operating Agreement is an internal document and therefore does not have to be filed with New York State like the Articles of Organization. It is, however, a best practice to have one in place, so LLC members have guidance on how to handle business transactions like ownership changes, distributions, and bylaws.
Without an Operating Agreement, LLC members don’t have governance around the day-to-day operations of the LLC. An attorney can help with Operating Agreements to ensure members are aware of their responsibilities and obligations. There are many templates available online to create one for your LLC.
6. Complete the New York LLC publication requirement
Under New York State LLC law, new LLCs must publish a notice in two newspapers for six consecutive weeks. One newspaper must publish daily, and the other must publish weekly. LLC members must pay a fee for this service to the publishing newspapers designated by the county where the LLC is formed.
Your county clerk can tell you which newspapers are acceptable for publishing.
Instead of publishing the Articles of Organization, the alternative is to publish a notice about the formation of the LLC. The notice must still include the same information contained in the Articles of Organization, and the LLC’s name and address must be identical to how it was filed with your county.
After providing the notice and paying a publication fee, the newspaper publishers will issue you an Affidavit of Publication which you must provide to the New York Department of State along with the filing fee.
Completing the publication requirement is important to avoid having your LLC prohibited from conducting business activity, which the New York Department of State will do unless you file the Certificate of Publication within 120 days of forming the LLC.
Theatrical production companies are exempt from the New York LLC publication requirement as long as the words “Limited Liability Company” are included in their names.
It’s not surprising that the publication fees in New York City are much higher than those of neighboring cities and can be $1,500 or more. As a workaround, you can select a registered agent service whose office address is outside of New York City to take advantage of lower publishing rates.
Once you file, you will receive a filing receipt from the New York Department of State. LLC members must verify that the information submitted is accurate.
Interestingly, you must also keep your filing receipt in a safe place because the Department of State will not reissue filing receipts for those that are misplaced or destroyed.
Luckily, filing receipts can also be emailed for convenience.
7. Open a New York business bank account
As a best practice, LLC members should open a business bank account. There are rules to follow for an LLC to remain compliant.
One is not commingling or mixing business and personal funds. Doing so implies that the LLC is not a truly separate entity and could void the personal asset protection for members that the LLC provides.
Your accounting and tax processes are also simplified when all transactions are related to the business. Your LLC must be registered with the state to open a business bank account, and you must have an EIN.
New York LLC taxes, costs, and fees
If you plan to sell physical products, you will also need to register for a Sales Tax Certificate of Authority with the New York Department of Taxation of Finance at least 20 days before you make a sale.
For each physical product you sell, you must collect sales tax from the buyer and file a sales tax return monthly, quarterly, or annually. To calculate the tax due on a sale, multiply the taxable sale amount by the sum of the state rate (4%) and any local tax rates.
Even if you don’t make any sales, you are still required to file the sales tax return to avoid failure-to-file penalties. You must also display your Certificate of Authority at your place of business, even if you do business from your home.
If you ship products to other states, you will also be responsible for collecting and paying sales tax in each state.
New York business permits and licenses
Depending on the industry your business operates in, you may be required to obtain a business license or permit. Certain businesses like hair salons, childcare centers, and real estate brokers require a license or special permit to operate in the state.
New York State has resources at the county and borough level to help you determine whether or not your LLC requires a permit or license to operate.
Pros and cons of forming an LLC in New York
As you prepare to form your LLC in New York, you need to understand the pros and cons. Here’s a quick summary.
New York LLC pros
- LLC members can form an LLC in about 30 minutes with the New York Department of State.
- Minimum compliance requirements
- Personal assets are protected from losses and legal action
- Pass-through tax treatment of profits and losses
New York LLC cons
- Investors frown on LLCs because of acquisition complexities
- Owners must be diligent in not commingling business and personal funds
- Members pay self-employment taxes
- Publishing rates in New York City are much higher than in neighboring cities.
- For each physical product sold, you must collect sales tax from the buyer and file a sales tax return monthly, quarterly, or annually.
- In New York State, LLC members must create and file their Operating Agreement within 90 days of filing the Articles of Organization.