If you are thinking about starting a business but are worried about the potential of losing assets should you be faced with any legal problems, a Limited Liability Company (LLC) is a great option for you.
If you live and/or plan to trade in New York, you will need to form a New York LLC. Today, we’ll guide you through the 10 steps it takes to take your business from an idea to a fully-formed legal entity. Let’s get started.
The first step is to choose a name for your LLC as you will need this to fill in your registration forms. Once you have chosen a business name, you should check on the Department of State Corporation & Business Entity Database to ensure it is not already taken in the state of New York. If it is, you will have to brainstorm other ideas.
It should be noted that New York is strict on the distinguishability of business names, so you also need to make sure that it is not too similar to any other LLCs operating in the state.
Your chosen name must also end with a designator that clearly identifies the company as an LLC. The designators you can choose from in New York are:
You also need to avoid including any abbreviations that could be confused with government agencies, such as IRA or CIA.
It can also be a good idea to find out if a relevant domain name is available if you want to keep all your branding consistent.
If you’re going to complete this process quickly, you don’t need to do this step. However, if you have a name for your LLC in mind and it may take you a week or two to file your Articles of Organization, then it can be a good idea to register your name.
To avoid another business using your chosen LLC name, mail this Application for Reservation of Name for $20, paid by check, cash, money order, credit or debit card, to reserve your LLC name for up to 60 days.
If you need longer than 60 days, you will need to file a Request for Extension and pay another $20 to give yourself another 60 days to get your business registered. You can only request an extension twice.
In the majority of US states, step 2 (or step 3 if they require you to reserve your name) is to choose a registered agent, but in the state of New York, they do things a little differently.
In New York, the Department of State serves as the registered agent for every LLC operating within the state, meaning that they receive any “Service of Process”, i.e. legal documents such as tax notices and subpoenas, and then forward them to your office address.
This means that you do not need to choose a registered agent, you simply need to provide the Department of State with your primary office address so that they can get legal papers to you.
You do have the option to choose another registered agent, but it is not required or particularly necessary. If you do decide to have another registered agent, note that we can be that agent for you.
You’re now on to a very important step! Through the filing of your Articles of Organization with the New York Department of State, Division of Corporations, your LLC will be legally formed in the state of New York.
It is best to complete this step online, as you will be able to receive your Articles of Organization (your Certificate of Formation as it is known in some states) instantaneously upon submission of the form.
Alternatively, you can fill out this form and mail it to the address stated, however, this will mean you will have to wait for LLC formation. The filing fee to receive your Articles of Organization is $200, paid by money order, credit or debit card.
The Articles of Organization for your LLC will state the following information:
In accordance with Section 206 of the New York State Limited Liability Company Law, once you have received your Articles of Organization for your LLC, you must have a copy of them, or at least announce the formation of your LLC, in two newspapers within 120 days. These newspapers will then issue affidavits of publication as evidence that you have done so.
You must then complete a Certificate of Publication and file it, along with the affidavits and a filing fee of $50 to the New York Department of State, Division of Corporations. Visit this page of the New York State website for more information.
All LLCs should create an Operating Agreement to use as an internal document. In most states, LLCs are not required to create this document - in New York, however, that’s different.
In New York, under Section 417 of the Limited Liability Company Law, an LLC must create and implement an Operating Agreement within 90 days of formation.
This Operating Agreement should:
An Operating Agreement aims to clarify the obligations of each LLC member so that the company and its members are less vulnerable to internal legal issues later down the line. For this reason, you should be sure to include any information you think is worth putting down in writing.
Although this is a legal requirement, the Operating Agreement remains an internal document and so does not have to be shared with the Department of State.
Once your LLC formation is complete, it is time to get your Employer Identification Number (EIN). This is essentially a social security number for your business, and you will need it in order to file and pay taxes, open a business bank account/s, and take care of other financial matters.
Once completed, you will instantly receive your EIN.
This step doesn’t need to be completed yet, but it is important to be aware of it when you form your LLC. The State of New York requires that all LLCs file a Biennial Statement every two years, by the end of the LLCs formation month, to validate that all information stipulated to the Secretary of State is current and accurate. This helps to ensure that all companies are paying the correct amount of tax.
If your LLC is considered a partnership for income tax purposes, you are required to pay an Annual State Filing Fee to the Department of Taxation and Finance by filing Form IT-204-LL. Your fee will be calculated based on the income of your LLC, with the fee limited to a maximum of $400.
To find out more about whether you will need to pay an Annual State Filing Fee, click here.
Before you can start trading, you will need to find out whether your LLC needs any licenses and permits and apply for them accordingly.
You may need state or local business licenses and permits, or some sort of certification depending on your business’ industry/purpose and its location.
To find out what licenses or permits you may need and how to apply for each, you can visit the New York Business Express page. If you need further help, it is advisable to get in touch with the local county clerk for guidance.
One of the final steps is to set up a separate business bank account. Although this is not a legal requirement, this is essential to ensure your assets are protected. Isn’t that why you chose to form your business as an LLC in the first place?
Having a business bank account will keep your personal and business assets separate, providing your personal finances and assets with protection should your LLC get into any legal trouble.
Use your EIN to apply for a business bank account now so you can start your business with good financial habits.
It is a legal requirement in the US to keep essential documents on-site, at your registered New York office. The documents you must keep are as follows:
Now, with every step of this guide completed, your LLC is formed and you are ready to begin trading in New York!
While completing all 10 steps is straightforward, it will take up a lot of your time that could be spent doing more exciting things, particularly if you are unsure about which forms you need to fill in and which information should go where. That is where we come in.
We will take care of everything for you, including registering the name of your LLC, filing for your Articles of Organization, and getting your EIN for you. All you have to do is fill out our short form, and we’ll take care of the rest, leaving you to start developing your customer base so you’re ready to make sales as soon as all these steps are complete.