A limited liability company (LLC), is a structure that offers protection from individual liability for company owners. In the event of a lawsuit against your business, the company itself will not be held liable as an entity since it does not have separate legal standing.
For this reason, LLC formation is often considered to be attractive to entrepreneurs who run their own businesses and own intellectual property such as patents and copyrighted materials. To start an LLC in New York state, you need to register your organization with the state.
Simple steps for starting an LLC in New York
The following steps will be your guidance through the procedure of starting your LLC in New York.
STEP 1: Name Your New York LLC
To form an LLC in New York, the business’s name must be accurate and not fictitious or confusing. Using trademarked names, such as “Jones & Company,” is not allowed. Legally, you can name your new LLC with any legal name but should avoid unoriginal names or common names which could confuse other businesses.
Limited Liability Company, or LLC, can be named:
- Any legal name
- Must end with an abbreviation “LLC” or the words “Limited Liability Company” or “Limited Company” unless you have registered with the Secretary of State. If it is not properly registered with the Secretary of State, you must end your LLC name with an abbreviation such as LLC. You can check and write your name here: http://www.dos.ny.gov/corps/buschart.
- Make sure your name is not similar to another registered business.
- You cannot use the same name as another active business in NY.
- The name must be distinguishable from any other existing name in New York State.
- You can check and verify the availability of your desired business name at: http://www.dos.ny.gov/corps/buschart/c1101.
STEP 2: Choose a Registered Agent in New York
The most common and effective way on how to form an LLC in NY is having a registered agent receive important business notifications as well as correspondence from the state. A good choice is a service called IncFile, and they are dedicated to providing professional registered agent services for forming corporations and New York LLCs and across the country.
Key moments when choosing a registered agent:
1. Discover the services and the prices they offer. You can check their website or contact them directly.
2. Check whether or not the company is a bonded registered agent, an unregistered agent, or a certified registered agent.
3. Prevent all other companies from filing against you because getting a registered agent is your only way to prevent other businesses from using your name as part of their name for unfair competition.
Here are some of the benefits it offers your business:
- A registered agent will provide you the required notifications before and after your formation.
- The registered agent must be licensed for a period of two years from the date of incorporation.
- The registered agent must be able to take oaths as required by law.
- The registered agent may sell, transfer, or assign their rights and obligations under any agreement to another person held within one year from when he is designated as a registered agent by the LLC’s articles of organization or operating agreement.
- The registered agent must complete a background check.
- The LLC’s registered agent will be responsible for demanding compliance from the company before filing any lawsuit and will take all of the necessary steps in asking for payment.
STEP 3: File Your New York LLC Articles of Organization
The Secretary of State’s office in New York State is the official state document custodian and will allow you to file Articles of Organization of your LLC. You can check your registered agent’s website, and it will provide you all the info that you need for forming an LLC in New York.
Click here to file your LLC articles of organization: https://www.dos.ny.gov/corps/buschart/c1013
List of documents that are required to be filed with the state after creating an LLC:
- Certificate of Incorporation
- Appointment of registered agent.
- Operating Agreement (if any)
- Notice of Annual Report Due
- New York State LLC Tax Registration Certificate (Form CT-105). You will need this form to file each year. For more info, you can check with the state’s taxation website: http://www.tax.ny.gov/busines/llc/index.htm
List of steps that are included in this process:
I. You will need to create your LLC’s Articles of Organization. The articles may only be one page or more, depending on the content you want it to include.
II. Fill out the Articles of Organization and submit them to the state in a prescribed form (Form CT-805). You can check your registered agent’s website for this document, and they will discuss more this service process with you in detail.
III. Get a filing receipt from the state proving that they received your articles under their official seal.
IV. A Certificate of Incorporation will be sent to you after completing the formation process.
V. File your LLC’s tax registration.
VI. The Secretary of State will send you a notice, and the appointed registered agent service will send you the official certificate of formation for your LLC’s Articles of Organization. This is required so that upon request, the SOS can confirm that your articles were accepted by them and filed in their office.
VII. You need to file your annual report with the SOS, and for this, you will need your LLC’s tax registration number, which is also known as Business Entity Taxpayer Identification Number (BETIN). To get it, you can apply for it on the state’s taxation website: http://www.tax.ny.gov/busines/llc/index.htm
VIII. The business filing and taxation fees are important to remember when you form an LLC in New York State. You can check the state’s website to know more about this, or contact IncFile, and they will provide you detailed information: http://www.incfile.com/services/llc-forms-certificates/ny
IX. After filing your articles of organization, a new business name is not available to anybody else in New York State for any reason, so choose it wisely.
X. A Certificate of Formation will be mailed to you after all have been filed.
XI. The SOS will also send you a notice, and the registered agent will send you the certificate of formation for your Articles of Organization.
STEP 4: Follow New York LLC Publication Requirements
All new LLCs in New York will be published for five consecutive weeks in two newspapers: The Daily Journal (or the Commercial Register) and the Wall Street Journal. The SOS does not provide a sample name on this, so you should follow this step as it is.
The publication costs of $10 to $50 are included in your initial formation cost, so check if your selected registered agent covers it or you will need to pay an additional amount to get these published. Your LLC’s formation documents must be published within 60 days after the filing date.
Check here to know more about these publication requirements: http://www.dos.ny.gov/corps/buschart/r0706.htm
STEP 5: Create a New York LLC Operating Agreement
Your LLC operating agreement is the next step in the formation process, and it is created with a purpose to serve as the guidebook on how your business operates. A properly executed operating agreement can greatly help you in understanding your legal rights and obligations within your business.
For purposes of this article, we will focus more on the LLC’s Operating Agreement, but remember that it is not mandatory by law, especially if you are forming a one-member LLC.
Basic guidelines on creating your LLC operating agreement are:
- You may appoint a manager for the LLC if you want.
- The Operating Agreement usually contains the names of all members, their financial contributions, profit and loss distributions, voting rights, and how decisions will be made.
- The majority of an LLC’s owners must sign an operating agreement before filing it with the Secretary of State’s office in New York State.
- The LLC will also need to file a certified copy of the Operating Agreement with the SOS when they file their business license.
STEP 6: Get a New York LLC EIN
The Internal Revenue Service (IRS) and New York Department of State Tax each have their own publications that will help you in understanding the steps needed to take to obtain a federal Employer Identification Number (EIN) for your business.
The EIN is an official nine-digit number that is required if you want your LLC to open a bank account, receive business accounts from vendors, get paid in cash by any means, apply for any type of tax exemption or grants, apply for tax-deductible status as a non-profit organization, etc.
5 steps are involved in this process:
- A business may choose to have a separate EIN from an individual who is also a member of the LLC.
- You will need to visit the IRS website and apply for your EIN using Form SS-4 online. Don’t forget to check out the tax tutorials on this site, as well!
- Next, you will need to get a certified copy of your LLC’s Articles of Organization from the state. This is to confirm that you have been officially accepted by them and are valid by law.
- You will also need to get a copy of the LLC’s Operating agreement from the Secretary of State (NYS) in your state. This is needed because it is one piece of official documentation for your business documents.
- Submit all these documents with Form SS-4 to the IRS and wait for the mail to arrive.
STEP 7: Common Write-Up Procedures for an LLC
The following obligations must be included in a limited liability company’s operating Agreement if it is formed in the state of New York (through our site or otherwise):
- Agreement on initial capital contribution and any additional capital contributions needed throughout the LLC’s existence.
- The manner in which profits and losses will be apportioned among the members,
- Determining the member’s rights of participation, including the right to receive distributions, ability to vote or act as a manager, etc.,
- The ownership interest(s) of each member and the percentage or number of shares owned by that person (depending on the type of membership),
- Providing for dissolution or ending the LLC’s business activity, and what happens if one member withdraws before dissolution is achieved.
- Agreement on the procedures needed to amend the operating Agreement and authorizing persons who can amend it.
- How you will handle any potential conflicts among members and directors. This rule must be included in case there is any dispute or disagreement between members and/or directors, which may lead to being sued by other members for breaching that constraint.
- How profits and losses will be distributed to members in the event that they are dissatisfied with the LLC’s sale or acquisition by another party.
- All of these procedures must be stated in the operating Agreement, even if you are not requiring them in your state.
- In the case that any member does not agree with any decision made by a director or LLC management committee for reimbursement of expenses, he or she has a right to file an objection to such decisions at any time within 30 days after they become aware of such funds being spent. In such cases, the decision of the majority of other members will govern until such a time that the dispute is resolved.
- All agreements concerning management and control must be settled in advance and agreed to by all members.
- At least 66 2/3% of all members must consent to a sale or major change in ownership interests and/or operation of the company.
- The operating agreement should specify which type of LLC is being formed: a manager-managed or member-managed LLC.
LLC Specifications for New York
1. An LLC registered in the state of New York may file to be taxed as an S Corp or C Corp.
2. In the event that a limited liability company is taxed as an S Corp, you must include in your operating Agreement:
a. The number of shares;
b. The classes of shares; and
c. All other restrictions, terms, and conditions.
3. In the event that a limited liability company is taxed as a C Corp, you must include in your operating Agreement:
a. The number of shares;
b. The classes of shares; and
c. All other restrictions, terms, and conditions.
4. A limited liability company should file Form 846 with the IRS to be recognized as an S Corp or C Corp in New York State.
5. You must pay a filing fee of $800 per shareholder and $400 per member for the first two people who are listed on the Articles of Organization.
6. A limited liability company must provide proof with its Articles of Organization that it is entitled to file as an S Corp or C Corp according to the specifications above.
7. A New York LLC should also file Form 1065 with the IRS to be recognized as an S Corp or C Corp in New York State if:
a. The company has one member; or
b. The company is filing for the first time as an S Corp or C Corp.
8. A New York LLC should file Form 1120S with the IRS to have the S Corp tax benefits if:
a. The company has more than one member; and
b. The company is filing for the first time as an S Corp.
9. A New York LLC should file Form 1120 with the IRS to have the C Corp tax benefits if:
a. The company has one or more members; and
b. The company is filing for the first time as a C Corp.
10. New York state charges $20 per LLC member and $35 per LLC officer for an initial LLC filing, and then a fee of $30 per year to maintain the company’s New York operating status. This fee is due every two years, starting with the third year after you apply.
Benefits of forming an LLC in New York include:
- No taxes on the first $40,000 in profit for individuals and $82,000 for LLCs.
- Tax-free distributions to LLC members of up to 25% of their annual net taxable income (if a C Corp) and up to 50% (if an S Corp). The maximum weekly distributions are limited by federal and state laws.
- Exemptions for losses incurred by an S Corp or C Corp on a personal level, which means you can deduct the losses from your other income sources.
- The right to have a corporation tax rate of 4% to 16%, depending on the company’s net income.
- The right to operate without needing to hold annual meetings, record votes, etc.
- S Corp shareholders (and other qualified taxpayers) may be allowed to deduct 150% of the health insurance premiums they pay for themselves and their dependents under certain conditions.
- Certain benefits are provided only to S Corps or LLCs that file their taxes as one of these types, such as protection against double taxation (the same profit is taxed only once) and a tax-free transition of assets if the company is sold.
- Special provisions for LLCs in New York allow them to withhold payroll taxes from dividend distributions.
How much does it cost to start a New York LLC?
In New York, you may form an LLC without charge, but some filing-related expenses are required. The cost is $800 for the first two members, $400 per additional member, and 0.5% of the net worth of each member.
You must also file Form 846 to be recognized as an S Corp or C Corp in New York State. The filing fee per LLC member is $80 per year and 0.25% of the net worth of the member. The LLC officer’s annual fee is $30.
Do not use your LLC to avoid paying state sales tax on goods or services you purchase for your business or for personal use. State and local governments can impose sales tax even if they do not charge it for you as a customer, and they can find you if you do not pay it.
Open an LLC Bank Account
Another way to protect your business is to open a bank account. Banks may help you set up and maintain your business bank account, which will allow you to save on the fees typically charged for cashing checks, which helps your company avoid paying extra fees for using cash when paying suppliers or employees. Your bank can also provide other services like allowing you to make electronic deposits or online bill payments.
Keep in mind that not all banks are willing to open business accounts. You can check with others to see if they will approve your company’s application, but it never hurts to call your local bank first, just to see if it will be a good fit for you.
How do I open a bank account for my New York LLC?
It is easy to open an LLC bank account. You will need to contact your local bank and tell them about your business, your ownership of the company, and your LLC operating agreement.
To become a member of the New York State Banking Department, you must:
1. Complete a simple application form that will take approximately 15 minutes to complete; and
2. Pass required state and federal background checks; and
3. Submit a certificate of good standing from your LLC’s secretary.
The certificate of good standing must include the name and address of your LLC, the names and addresses of the members, and a statement that the LLC is in good standing. This statement should include the number of members if there are multiple members on record with your LLC.
You will receive a certificate of good standing when you submit your final list of initial or additional LLC members to New York State.
New York LLC Permits and Business Licenses
An LLC with more than one member must obtain an annual business permit. The permit is issued by the New York City Department of Consumer Affairs.
Steps to complete this application:
1. Call the New York City Licenses & Permits Bureau at (212) NEW-YORK (6654) and request an application form; or
2. Download the online application from the NYC Department of Consumer Affairs website at http://www.nyc.gov/html/dca/html/business_permit.shtml; or
3. File an application online at: http://www.nycboardwalk.com/.
Once you have obtained your business permit, you will need to obtain a license if your business has more than one member, and it earns more than $25,000 per year or handles more than $25,000 in gross receipts per year.
To apply for a business license, you must:
1. Determine the type of license you need by looking at the business tax classifications from New York State; and
2. Call the New York Department of Consumer Affairs (Bureau of Licensing) at (212) NEW-YORK (3375), from 8 a.m. to 5 p.m., Monday through Friday; or
3. File an online application at http://www.nycboardwalk.com/start/.
New York State Tax Requirements for LLCs
All LLCs that use a Single-Member Limited Liability Company (S-Corp) or a Multi-Member Limited Liability Company (M-Corp) to file their taxes must submit state taxes every year by April 15 and pay any state taxes due.
New York Sales Tax
Sales tax varies by county. Local sales taxes are added to the New York State sales tax rate of 4%.
You must also pay state and local sales tax if you purchase goods from a non-New York supplier, even if you use those goods or services in your business. Some exceptions exist, such as for the purchase of an exempt product.
You do not need to collect sales taxes on purchases shipped to places outside the state of New York, but you still need to charge the applicable rate on these types of purchases.
New York Employer Taxes
If your LLC is considered a Sole Proprietorship or Partnership, you will need to file Form FW-3 annually with the New York State Department of Labor to report income and withhold employee taxes. Once your LLC is established as an S Corp or C Corp, the corporation will be responsible for employer tax payments.
S corporations are classified as pass-through entities, which means that all of the LLC profits and losses are passed through to the business owner on his personal income tax returns.
Depending on the type of business you have, you may be eligible for industry-specific taxes. For example, if your LLC sells cigarettes or gasoline, you will need to obtain an Excise Tax License and collect excise taxes at the vendor level.
The Federal Government, state and local governments, and other agencies all have different rules when it comes to employing workers using an LLC. Be sure to check with each agency before making any major employment decisions.
The New York Secretary of State charges a $150 annual fee for filing and maintaining your LLC’s records and uniform commercial. The fee is due the first year on your anniversary date.
Federal LLC Tax Filing Requirements
The federal government requires all LLCs to file a Form 1065 every year, which is due by April 15 of that year.
The required information filings for an LLC are:
1. Partnership tax returns
2. Wage and Tax Statements (Form W-2)
3. Form 1065, U.S. Income Tax Return of an S Corporation or Subchapter M Corporation, or
4. Federal Income Tax Return Guide for Estates and Trusts for those that need federal tax preparation assistance.
To file a federal income tax return, you will need to use the services of an accountant and accountant or attorney.
Hiring Employees in New York
You can hire employees in New York as soon as your LLC is established. As an employer, you are required to:
1. Comply with both federal and state safety regulations; and
2. Comply with federal and state employment laws that govern sick leave, minimum wage, working hours, unemployment insurance taxes, and workers’ compensation benefits.
2. Comply with the federal and state employment laws that govern sick leave, minimum wage, working hours, unemployment insurance taxes, and workers’ compensation benefits.
Establishing Employee Policies
You should establish an employee handbook to help you run your business in a professional manner. In this employee handbook, you will want to define the policies for:
- Sick leave;
- Minimum wage;
- Work hours; and
You should also establish a grievance procedure to guide employees when they have grievances against you.
The Wage and Hour Law
New York State law requires that employers pay their employees the following:
1. Wages of at least $75 per week;
2. One hour of pay for each hour worked;
3. Overtime wages of at least one and one-half times regular wages for hours worked over 40 in a workweek;
4. Wages of at least $100 per week for employees who work more than 40 hours per week;
5. Properly documented minimum wages paid to employees, and 6. Employers must pay overtime wages whenever an employee works more than eight hours in a day or 40 hours in a workweek.
You are also responsible for paying:
- Employees who earn $500 or more in a year;
- Employees who work 15 or more days within any 30-day period;
- Employees who have worked for your company for a year or more;
- Employers that employ 50 or more employees in New York; and 5. Employees who are minors.
Under the Wage and Hour Law, you must:
1. Allow new employees to take time off work whenever they may need it to recover from an illness, medical treatment, or injury;
2. Provide paid sick leave to all employees as soon as possible after the legal start date of the employee’s employment with the company; and 3. Provide at least 24 hours of paid sick leave to all employees each year.
Employment Contracts in New York
If you want to protect your business from potential lawsuits, you should establish an employment contract with all of your employees. An employment contract also helps you as the employer maintain control over standards of performance and working conditions. The basic elements needed in an employment agreement are:
1. Job description, including major duties, time requirements, and/or required employee skills;
2. Start date;
3. Work schedule, including the number of hours per day and/or per week;
4. Compensation and benefits, including at least minimum wages, overtime pay, permissible deductions from wages;
5. Advance notice requirements for the employee before changing his schedule or employment contract;
6. Notice period required for the employer to terminate the employment contract;
7. Tax information or Agreement on how taxes will be paid and filed; and
8. Definition of employee responsibilities and expectations.
Establishing Workplace Safety
You are required to develop a written safety plan and post the plan in an area where employees can see it. The safety plan should include:
- A list of workplace injuries that have occurred over the last five years;
- An action plan for correcting unsafe conditions;
- Preventive measures for avoiding unsafe conditions;
- Training requirements for new employees; and
- Written procedures for reporting unsafe conditions.
Laws Continue to Evolve
The law is always changing, so you should always listen to what the courts have to say. Watch for new laws and changes in laws that could affect your business. Make sure your business is following all applicable laws and regulations.
You can find more information about other state LLCs at: https://www.businesslawschool.com/special-topics/llc-law/.
Now you know more about starting your LLC in New York State. Follow the advice outlined in this article to help you start your LLC and to provide you with the knowledge you need. As an independent business, it will be important for you to do your research every step of the way from doing a thorough legal review of the state laws and regulations, choosing a name for your new business, taking care of the registration process with all the legal documents that are required, and getting support before and after getting started.
Remember that this is just a general outline of starting an LLC in New York State.