Steps to Forming an LLC
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How to Form a New York LLC
Forming an LLC in New York will help protect your personal assets from lawsuits and judgments against your business. An LLC is a business structure that separates your business and personal assets. By not having your business in a separate legal structure, you can be held personally liable for certain debts and lawsuits incurred by the company. Forming a New York Limited Liability Company does not require an attorney and you can save a lot of money if you do it yourself with the six simple steps below.
Before getting into the six steps, here are a few things to know about New York LLCs.
How Much Does It Cost to Get an LLC In New York?
The filing fee for a New York Limited Liability Company is $200, paid to the Department of State. New York also requires publication of new LLCs upon formation, which costs an additional $50.
Expedited filing is available at an additional charge. Expedited filing fees are: (1) within 2 hours for an additional fee of $150; (2) the same day for an additional fee of $75; and (3) within 24 hours for an additional fee of $25.
Fees are payable to the New York Department of State, Division of Corporations.
New York Annual Report and Annual Fees
New York requires all LLCs to file a biennial statement to update the New York Department of State with contact information, registered agent, etc. The filing fee for a New York LLC biennial report is $9 and is due every other year by the end of the year the LLC was formed. Payment is made to the Department of Taxation and Finance and can be paid by credit card, money order or certified check.
- Minimum Number – one or more
- Members/Managers- at least one is required to be listed in the Articles of Organization
- Residence Requirements – none specified
- Age Requirements – none specified
Business Licenses & Permits
New York requires most businesses to obtain a license and pay a fee if operating in the state. Please check with the state to make sure your business is complying with the license requirements for your particular profession.
The following professions must file as a PLLC (Professional Service Limited Liability Company): acupuncture, architecture, athletic training, audiology, certified shorthand reporting, chiropractic, dentistry, dietetics and nutrition, engineering, interior design, land surveying, landscape architecture, massage therapy, medical physics, medicine, midwifery, nursing, occupational therapy, ophthalmic dispensing, optometry, pharmacy, physical therapy, podiatry, psychology, public accountancy, respiratory therapy, social work, speech-language pathology and veterinary medicine.
In addition to forming your LLC, you will need to check for New York business licenses and permits.
Steps to Forming a New York LLC
Step 1. Naming Requirements
New York LLC Name Search
Before settling on the name of the LLC, you want to be sure nobody else is using it as each LLC must have a unique legal name. Here’s how to search available LLC names in New York.
If you find a business name you want to register, but aren’t ready to form your LLC, the New York State Department of State – Division of Corporations to hold the name.
Your company name must end with the words Limited Liability Company or an abbreviation of these words (“LLC,” “L.L.C.,” “Limited,” “LTD.,” “LTD”.). Check out our article on naming your LLC for all of the requirements that you must follow when naming an LLC.
If you find a business name you want to register, but aren’t ready to form your LLC, the New York Department of State to hold the name.
Step 2. Choosing a Registered Agent
What is a Registered Agent
A registered agent is the central point of contact for the LLC, that can be either an individual or business entity, that receives important legal documents, tax notices or communications with the state.
Registered Agent Requirements
The registered agent must generally be available during normal business hours at a physical street address in New York to accept service of process. A Post Office Box or personal mailbox is not acceptable. If the registered office includes a suite number, it must be included in the registered office address.
Who can be a Registered Agent in New York?
A registered agent in New York can either be a resident of the state or a corporation authorized to do business in the state.
Provided you as the business owner have a physical presence in New York, you can be the registered agent, however, there are additional privacy benefits to having a third-party registered agent.
Check out our article on why an LLC Registered Agent may be a good choice for your business for more details.
Step 3. Filing the Articles of Organization
The Articles of Organization is the paperwork used to form an LLC with the state of New York. This is the most important step and many people believe that you need an attorney to file.
While we don’t discourage having an attorney, filing a New York LLC can be done by most people, but you can save considerable money over an attorney and make sure everything is filed correctly by using a formation service such as ZenBusiness.
Step 4. Creating an Operating Agreement
An LLC Operating Agreement is required to be adopted 90 days after the filing of the Articles of Organization.The primary function of the LLC Operating Agreement is to govern the relationship between the owners of the business, but also outlines who makes what decisions, how profits or losses are distributed and the operating procedures of the LLC.
Learn how to create an LLC operating agreement
Step 5. Publication Requirements
Within 120 days of forming the LLC, a copy of the Articles of Organization must be published once a week for six successive weeks in two newspapers in the county in which the LLC is located. One newspaper or publication must be “printed daily” and the other “printed weekly.” The newspapers must be designated by the county clerk.
The printer or publisher of each newspaper will provide an Affidavit of Publication after the advertisement runs. A Certificate of Publication, along with the Affidavits of Publication must be filed with the New York Department of State, Division of Corporations, One Commerce Plaza, 99 Washington Avenue, Suite 600, Albany, NY 12231. The fee for filing the Certificate of Publication is $50.
Step 6. Get an EIN
What is an EIN?
The Employer Identification Number (EIN), or Federal Employer Identification Number (FEIN), is used to identify a business entity. It is essentially a social security number for the company.
In addition to the EIN being an identifying number for the LLC it serves a few other purposes such as:
- Opening a business bank account
- Federal and State tax purposes
- The business account to pay payroll taxes for employees paid by the company
How to Register an EIN for a New York LLC
To file an EIN for your LLC, visit the Internal Revenue Service (IRS) or obtain the SS-4 form. They show the steps on how to apply, but here is a video on how to apply for an EIN for more details. In about five minutes, you will have your number free of charge. Be sure to wait until your LLC is approved before applying for your EIN as the name that is registered for the LLC must be the same as the EIN.
Step 7. Selecting the Tax Status of the LLC
In addition to the personal liability protection the Limited Liability Company provides its members, another key benefit of an LLC the four business entities don’t provide is the flexibility in taxation. There are four ways an LLC can be taxed, compared with two ways for a corporation.
- Single Member LLC – An LLC with one member automatically becomes a single-member LLC with the IRS. The owner simply files their Schedule C with their 1040 at the end of the year. Filing as a single-member LLC means the entity does not pay sales tax and goes to the owner which is called pass-through taxation. The owner pays self-employment taxes on the net profit of the LLC, which while simpler to handle taxes, may be more costly.
- Partnership LLC – An LLC with two or more members is automatically considered a Partnership with the IRS and will file Form 1065. Like the sole-proprietorship as a pass-through entity, the LLC taxed as a Partnership pays no income tax and profit and losses flow to each member’s Form 1040s via Schedule K-1 of Form 1065.
- C Corporation LLC – An LLC can elect to be taxed as a C Corporation by filing IRS Form 8832. The major difference as an LLC that is taxed as a C corporation is that now the LLC pays tax on the profits and losses and are not directly passed down to the members. Most, but not all will find filing as a C Corporation will cost more in taxes as now the LLC has double taxation where there is a tax on the profits and dividends.
- S Corporation LLC – To get S Corporation status, you will file Form 2553 with the IRS. What makes the S Corporation attractive unlike the sole proprietorship or partnership is that you can potentially shield some of the profits from being subject to self-employment taxes. Dividends aren’t typically subject to self-employment taxes which is a large potential savings. There will be more work in accounting for an LLC that elected S Corporation status.
Each of the four ways for an LLC to be taxed in New York can have a major impact on the taxes that are charged depending on the business and the member’s personal finances. It’s a very good idea to work with an accounting professional to see which one is most efficient for the business and members.
Don't want to go it alone but don't want the expense of an attorney? Another alternative is to use an LLC formation service that will do the formation at a low cost.
ZenBusiness has a special offer right now to form an LLC for $49 plus the cost of the state fees.
Step 8. Open a bank account for your business
Opening a separate LLC bank account is important as it establishes a clear division between your personal and business finances. Should the LLC be sued and you are using a personal bank account for your LLC’s finances, that would be considered a commingling of funds, which may make it difficult to maintain the liability protection of the LLC.
To open a bank account for your LLC, you will need to bring the following with you to the bank:
- Form of identification for each member, such as a driver’s license
- Copy of the Certificate of Formation
- LLC operating agreement
- Employer Identification Number – If you are a single-member LLC with no employees, you can simply use your Social Security Number
A bank resolution may be needed depending on the bank and the tax election of the LLC. A banking resolution is a formal document that provides authorization for who has access to the LLC bank account.
Learn more about opening a bank account for an LLC
Step 9. Obtain a sales tax permit (not required for all businesses)
If your business sells a taxable product or service you will also need to apply for a New York Sales Tax Permit through the New York State Department of Taxation and Finance.
Wanting to form an LLC in a state other than New York to save money on taxes? This doesn’t typically do as much as you may think as you will likely register an LLC in the other state and will also usually need to file as a foreign LLC in your home state of New York as well. In addition to paying two filing fees to start the LLC and two annual reports each year, there will be multiple tax filings as well. Be sure to do your research as there are a lot of people promoting formation services in other states and weigh all the pros and cons before making this decision as it can be a costly one.