Fact checked for accuracy by Billie Anne Grigg, a bookkeeper and Mastery Level Certified Profit First Professional.
Starting a small to medium business in New York is not difficult and is actually quite easy to do when choosing to form an LLC, also called a limited liability company. Forming an LLC in New York has tax benefits, flexibility, and even liability protection.
This article will provide a step-by-step guideline on how to form an LLC in New York, including tips for keeping your business compliant.
Step 1: Choose a Name For Your LLC
Choosing a name for your LLC is the very first step in forming your business. When deciding on the name, you should ensure that it is unique and not a name that is already registered. You can do this by searching for the name on the state’s Corporation and Business Entity Database. You should also see if the name is available as a web domain.
The state of New York has the following guidelines when choosing a name:
- The business name must include the words Limited Liability Company, LLC, or L.L.C.
- The business name must be 100% unique
- The business name cannot contain any words that are used to name a government agency
Read up on all the rules here.
Once you have chosen a name, you can reserve this name for up to 60 days for a $20 fee, as the approval of this name will only happen once you have prepared and submitted the Articles of Organization.
There is also an option to choose an alternative business name aside from your legal LLC name. This will cost $25 and can be submitted to the state using form 1338-f
Step 2: Choose a Registered Agent
A registered agent is someone who handles legal matters and acts as your point of contact with the state. Their most important function is to accept service of process in the event that your business is sued. New York’s the Secretary of State acts as a registered agent for all LLC businesses by default. This, however, does not mean that you can’t hire your own registered agent.
All registered agents should meet the following requirements:
- Must be older than 18 years old.
- Must have a physical address in New York.
- Must be onsite during business hours to receive any legal documents.
Step 3: Prepare and File the Articles of Organization
This New York Form 1336-f – Articles of Organization is a document that contains all the basic information and layout of your LLC business. And this is essential to opening up a legal business in the state.
To complete the form, you will need to have the following:
- Your chosen LLC name
- The county in which the LLC will be located
- A New York physical address where legal documents can be sent. If you have hired a registered agent, you can use their address
- The signature of the organizer of the LLC, usually the owner
You can submit the Articles of Organization by mail, in person, by fax, or even online for a fee of $200. Upon filing, you will receive an official filing receipt. The filing receipt will include the following:
- Date of filing
- The name of the LLC
- An extract of information from the Articles of Organization.
- Receipt of the fees paid
Keep this receipt safe as the state does not issue duplicates or replacements for missing receipts. Once this form is approved, your business will be legally declared an LLC in New York.
Step 4: Complete the Publication Requirement
The State of New York requires that within 120 days of formation, all LLCs must publish a copy of the Articles of Organization in two different newspapers. The newspapers must be approved by the local county clerk of the county in which you have stated where your business will run in your Articles of Organization.
This need to be published in a weekly paper, once a week for six consecutive weeks, and in a daily paper, once a day for six weeks.
You will then need to submit the Certificate of Publication as well as affidavits of publication of the newspapers, which will be given to you by the newspaper agencies. The fee to submit is $50.
Step 5: Create an Operating Agreement
New York law requires all LLC businesses to create an operating agreement within 90 days of filing the Articles of Organization. While you are not required to submit this document to the state, you do need to create one for the business. But regardless, creating an operating agreement is a good idea in case you are ever in court for any financial disputes and even litigation.
This document essentially outlines how you will conduct business and should include the following information:
- Name and address of the LLC
- Name and address of the registered agent
- Information about the articles of organization
- The purpose of the business
- The members and their roles within the LLC
- The manner in which the profits and losses will be divided
- Hiring procedures
- Indemnification and liability clauses
Step 6: Get an Employer Identification Number
The Employer Identification Number, also known as EIN, is issued by the Internal Revenue Service for tax-paying purposes and is the final step in forming an LLC in New York. You can apply for this nine-digit number online through their website.
Having an EIN allows you to do the following:
- File and manage state and federal taxes
- Open a business bank account
- Hire employees
Cost to Start an LLC in New York
There are a number of costs you will need to budget for when forming an LLC in New York. The filing fee for the Articles of Organization is $200. The cost of a registered agent can start from $39 for the first year. The cost to reserve a name for 60 days is $20, and there is a $25 fee to file an alternative name.
The costly part of starting an LLC in New York is meeting the publication requirement. Publication in New York City can cost even up to $2,000, but if your county is outside of the big city, it can cost as little as $80 to $100. Lastly, you will need to file the Certificate of Publication for a fee of $50.
What To Do After Forming Your LLC in New York
Now that your LLC is officially formed, there are a few things you need to do next to ensure that your LLC runs smoothly.
Apply for a New York Certificate of Good Standing
This certificate verifies that the LLC was legally formed and is properly maintained. Some banks may require you to present these when opening new accounts.
This certificate can be ordered from the state for $25.
Open a Business Bank Account
Using your EIN number, you can open a bank account for the business. This is a good way of separating your personal assets from the business and will assist when it comes to paying taxes.
Hire an Accountant
Hiring an experienced accountant can help your LLC with tax preparation, payroll, bookkeeping, and sound financial planning.
Get Legal Advice
Hiring a professional lawyer can help prevent your LLC from making expensive legal mistakes while providing helpful legal advice. A good lawyer can assist with drafting contracts, employee disputes, intellectual property rights, contractor laws, and violations in the workplace.
Get Business Insurance
It is a good idea to invest in business insurance as it can offer liability protection in the event that your business gets sued. There are many different business insurance options out there, so be sure to shop around to find the right fit for you and your business.
How to Keep Your LLC Compliant in New York
To ensure that your business remains in good standing with the state, you will need to complete a number of things:
- Ensure all permits and licenses are up to date – use this link to check what licenses you might need
- Register for and pay all taxes
- File your New York LLC Biennial Statement every two years (the fee is $9)
- Follow New York hiring guidelines – find out more here
- Abide by state regulations
Tax Filing Requirements for LLCs in New York
One of the reasons many people form LLCs in New York is the simplicity of taxes and their benefits.
In New York, the state applies a default tax status of disregarded entities for single-member businesses and partnership status for multi-member businesses. As most LLCs in New York are considered pass-through entities, owners or members of the business will pay sales income tax on their own personal tax returns.
However, if you want to be taxed as a corporation, you will need to file a separate tax return to pay taxes directly to the state based on the business’s income. As this procedure is slightly more complicated, you can find out more information on the Department of Taxation and Finance’s website.
If you have hired employees, you will need to pay state employer tax, which will be paid to both the state and federal tax agencies.
The tax requirements can be quite complicated at times so it is recommended that you hire a professional accountant or lawyer to assist you with the process.
Frequently Asked Questions
How long does it take to register an LLC in New York?
If you have registered via mail, the average processing time is 7 days. There have been cases reported that it can take up to 4 months to get approval and another 7 weeks to receive the Certificate. However, there are expedited services available for an extra fee:
- 24-hour processing – $25
- Same-day processing – $75
- 2-hour processing – $150
If you file your Articles of Organization online, it can take up to 7 weeks to receive the Certificate.
What tax structure should I choose for an LLC in New York?
The state of New York automatically assigns a default tax status for LLCs, so the decision is made for you regarding which tax structure your LLC will fall under. There are two structures the state assigns:
- Disregarded entity – For single-member LLCs
- Partnership – For multi-member LLCs
These tax structures are the simplest option as disregarded entity businesses don’t need to file tax returns under the company – instead, they’re done through the member’s personal tax return. With the partnership structure, each member pays self-employment tax on their share of the partnership profit.
You can also choose for your LLC to be taxed as a corporation. If you choose to be taxed as a C corporation, you will be subject to the New York business franchise tax.
In the end, the right tax structure will depend on each business as every LLC has a different situation. Consult a business attorney or accountant for the best advice on what tax structure would be ideal for your particular LLC.
Should you hire an LLC formation service in New York?
While it may seem like a lot of work, forming an LLC by yourself is actually quite easy. But if you’re unsure or would rather have a professional complete the registration for you, there are plenty of LLC formation services out there that can help you out. As a plus, many of these services also offer registered agent services, which can come in handy and can even save you money by having you register your LLC in a county outside of New York City.