New York is a state that draws in a lot of businesses. It’s considered one of the more friendly places for new companies, whether that business is an LLC or a corporation. New York is a state that draws in businesses with incentive programs that benefit LLCs or corporations. If you’re planning on forming a business in New York, an LLC might be a right up your alley.
What is an LLC?
A Limited Liability Company (LLC) is a versatile business entity that is generally simple to form, less complex than a corporation, and easy to maintain. Most of all, an LLC provides what any business owner should have: liability protection. With an LLC you have all the same tax expectations as you would a sole proprietorship, with an array of protections and benefits for all of your personal assets.
Reasons to Form an LLC
If you’re planning on running your own business, you may not be aware of the risks involved with providing a service to members of the public. Incorporating in New York comes with many protections, and also a lot of complexity. There are many reasons an LLC is a better choice:
Starting a business takes a lot of financial investment, which can be risky. If your business is sued or ends up failing, investors and creditors will aim to reclaim their lost investments. Limited liability protection creates a separation between your personal assets and those owned by the company, ensuring that what belongs to you stays yours.
Flexible Tax Management
An LLC has the ability to elect how it is taxed. It can take advantage of pass-through taxation like a sole proprietorship or an S corporation, or it can take advantage of C corporation tax benefits, without having to deal with shareholders or appointing a board of directors.
Less Rules and Regulations
There are a lot of legal protections to set up with a corporation. You have to elect a board of directors, appoint corporate executives, and distribute shares. For an LLC, you can deal with most of your rules and mission goals by creating an Operating Agreement. The process is way less complicated with fewer members involved.
Corporations have a limit on how many owners they can have. Meanwhile, an LLC has unlimited options. An LLC can be a single-member operation, or have multiple owners. These owners, or members, can be individuals, corporations, or other LLCs, with no limit to the amount of members.
If you’re seeking investors or looking to make a name for yourself, it becomes much easier to be treated professionally when you have a business. Sole proprietorships can get the job done, but to the common person, a company that is official is much more trustworthy. It shows you mean business, since you formed one.
How to Form an LLC?
Forming an LLC is the easiest way to protect your assets and become an official business entity. It’s a simple process that we make more simple with what we provide. If you are curious about the process, here are all the steps involved with starting an LLC in New York.
Step One: Choose a Name for Your LLC
Creating a company starts with the right name. Having a title that can quickly explain what services you provide saves a lot of time explaining the services you provide. By default, a company will just be the name of the owner. When you create an LLC you should include something designating it as such (by including LLC, L.L.C., Limited, or something like that.) It should also be a name that’s available. You can check for availability using the Department of State inquiry webpage. You can reserve a name that’s available for 60 days by paying a fee.
Step Two: Choose an Agent for Service of Process
New York has a built-in system for LLCs and an agent for service of process. When you form an LLC, the New York Secretary of State is automatically assigned to accept legal documents for you. It’s nice in theory, since most other states will require you to designate your own or risk your business being dissolved, but it’s a slow process that eats up valuable time. If the Secretary of State is notified of a lawsuit against you, your business will have a deadline to respond. Since the default system is to mail notifications to you, you will lose time based on the speed of the postal service. Having a registered agent of your own choosing gives you necessary time, as well as another bonus listed below.
Step Three: File Your Articles of Organization
Filing the Articles of Organization marks the official creation point for an LLC. It is to an LLC what the Certificate of Incorporation is to a corporate entity. It can be mailed to the New York Department of State or filed online, and it must include the following:
- The Name of the LLC
- The New York county it will be located
- A valid New York address where the Secretary of State can mail legal documents to the LLC
- The name, address, and signature of the filer
- A filing fee of $200
Step Four: Prepare LLC Operating Agreement
Most states allow new LLCs to decide whether or not to write an operating agreement. New York law requires every LLC to adopt a written agreement either before, at the time of, or within 90 days of filing the Articles of Organization. This is a document that defines the rights, duties, liabilities, and powers of each member. Even though it’s a document stored internally within the company, it’s expected for every LLC to have one composed.
Step Five: Publication
Once you’ve filed the Articles of Organization, you have 120 to publish in two separate newspapers either a copy of those articles, or a notice about the formation of the LLC. The newspapers must be published in the same county your company is formed. The publishers will provide you with two affidavits of publication, which you then submit along with a Certificate of Publication and a $50 filing fee.
Here’s where having a registered agent can save you hundreds of dollars. The county your business is located in is tied to the address you provide in the Articles of Organization, and with a registered agent service, you can use their address. Shifting the location of a New York City business to a county like Albany can save over $1000 on publication costs alone.
Step Six: Comply with New York Tax Requirements
If your LLC has multiple members, you’ll need to request an Employer Identification Number (EIN), even with zero employees. If you have a single-member LLC, you will need an EIN if you elect to be taxed as a corporation. An EIN can be obtained online from the IRS website. No filing fee is involved.
Your business may also need specific business licenses to operate legally. If it involves a service that is subject to sales tax, you will need to apply (no fee) for a Certificate of Authority.
New York has an annual state filing fee associated with every LLC, domestic or foreign, that conducts business in New York. This fee must be paid whether or not your business earns an income, and can range from as little as $25 to as high as $4500. This fee is paid to the Department of Taxation and Finance (or just the Tax Department) by filing a Form IT-204-LL.
Who Should Start an LLC?
Anyone with the motivation and desire to start a business should consider starting an LLC. If you’re already doing work as a sole proprietorship, take the extra steps to protect your personal assets. If you think New York is the state you want to form a business, contact us today and we can help you get started!