How to Start an LLC in New York State: Formation Guide 2022

Are you thinking of doing business in The Big Apple? New York is home to millions of small businesses teeming with millions of employees? This state is additionally the third largest economy in the country. You can thus imagine how much potential it has in store for you.

Business in New York

Here are some reasons why many businesses flourish in this city:

• Startups – there are so many people looking to start and grow their companies in this state. Why? Well, the finance opportunities are immense and have seen startups such as Etsy rise to the top.
• Incentives – as a growing business, you do not want to be riddled with fees left, right and center. You will be happy to note that there are tons of tax incentives in the state to keep you going. Some allow you to operate without paying taxes while others offer you money to keep running.
• Transport – moving around in the city is easy, thanks to the amazing transport facilities. Additionally, the state boasts of tens of airports, enabling you to fly out as needed to meet clients.
• Talent – you always have to consider who you can have helping you to grow your business. Almost half of the people living in the city have been to college. You can thus imagine how easy it is to find the right candidate for a position in this large talent pool.

Are you ready to open an LLC in New York? Here is what you need to do:

Step 1: Name Finding and Structure Organization

Before naming your business, you have to decide on which structure you will follow. The laws governing the naming of an LLC are different from those governing a corporation. Choosing a structure comes down to how much protection you want, whether you wish to bring more people on board and how complex you want the operations to be. Here are some of the considerations at a glance:

• Protection. In this case, we mean how much protection you can enjoy in the event that something goes wrong. While you will not set out to be on the wrong side of the law, you do not have much say as to what can happen in the future. Take the example of where someone has an accident in your business premises. How liable will you be for that? Having protection means that your personal assets remain safe as you pay off any debts or liabilities using what belongs to the business. The structure of the business determines how protected you are. Formal structures such as LLCs offer some protection while informal ones can cost you. It all comes down to separation of the business from the owners.
• You also need to consider whether you would like to have more people joining the business. Some structures curtail you as to the number of owners you can have.
• Formalities also matter. You have to understand how much you need to do to have good standing within the law e.g. the holding of annual meetings, taking of meetings and other such activities.

Why an LLC is a good idea

Are you confused as to if you should create LLC in new York or choose an informal structure such as a partnership? Here are some characteristics that make your operations best suited for formality:

• Where you plan to reach many customers over a wide region, formality would be great
• It is also important to gauge how much profit you expect in the coming years. For businesses that can generate sustainable revenue, formality is the winner.
• How likely are you to lose money in the day-to-day operations of the business? If your operations carry a high risk of loss, you are better off going the formal way.
• The money spent on taxes also matters. Take the example of where you would like to have more flexibility in your payments. In this case, a formal structure would be your best bet.

Below are some advantages of going the formal route:

• Protection – we earlier mentioned that separating yourself from the business goes a long way in protecting your personal assets. That allows you not to lose everything in the event that things do not work out as planned.
• Flexibility – not only can you add members as you would like but you also get a say as to how much money you pay in taxes. Being in a formal structure allows you to adapt your payments to the strategies that allow you to pay less. How great is that!
• Expansion – given that you do not lose everything and can still customize your payments, you have a head start when it comes to growth. You may have noticed that companies tend to grow faster than informal setups.
• Credibility – as an LLC, you will have far much more opportunities to take out loans and engage investors as compared to an informal setup. This advantage allows you to grow at an even faster rate.

Naming

Once you have settled on a structure that works for you, the next step lies in naming it. At this point, the assumption is that you are working with an LLC, as this article will focus on this type of business.

The one thing you should keep in mind is what you want to communicate to your customers. In some cases, you can decide to use a different legal name from that of your brand. It all depends on what you want. Please note that for separate naming, you need to file a DBA. This filing also applies where you have one legal name but operate under different brand names.

Once you come up with a possible name, you have to make sure that it is different from those registered at state and federal levels. You can do the NY LLC name search on the New York Department of State website. Keep checking until you are sure that nobody else has rights to the name. Moreover, you should look into if anyone has a trademark to the same.

You should also consider checking if anyone has registered a website using the preferred name. It would be quite challenging for you to start a site using a name that is different from that which your consumers know.

Regulations

Having covered all these bases, you can then ensure that your name meets the following conditions:

• It should show that the business is a formal LLC structure by having a suffix on the same. You can state it as Limited Liability Company or use an abbreviation of this.
• It should not include names or phrases that can confuse the public into thinking that the business is a government agency. Thus, names such as treasury and state department should not appear in the name.
• It should not contain words that allude to the business being a professional practice. Take the example of attorney. Where you use such a name, you need to file paperwork, showing the need for this. Additionally, you need to have an attorney working in your business. This guideline applies to other professions as well.
• It should not contain any similarities to other entities. If someone owns a company that has naming close to yours, you have to be careful that the names do not match. Also, go through the guideline to understand what qualifies as a difference and what does not.

To ensure nobody else can use your name, you can reserve it at a fee of $20 by making an application to the following address:

New York Department of State, Division of Corporations
One Commerce Plaza, 99 Washington Avenue
Albany, NY 12231

Step 2: Find a New York Registered Agent

You are probably aware of the need to have an agent representing your business. In many states, this agent (whether company or individual) is your point of contact with the authorities. However, that is not the case in the Big Apple. Here, the Secretary of State serves as your agent by default. However, you are free to elect someone else to take up the role. Please note that this chosen person or company will not be the primary point of contact, but rather the secondary person of contact. Thus, for any legal action taken against your business, the secretary of state will still be the first to receive the same. Where you have an elected registered agent New York, this information will be forwarded to the designated person.

Your New York registered agent LLC is in charge of the following responsibilities:

• Acts as the main point of contact with the state. As such, they receive information regarding compliance of the business, as pertain to taxes, licenses and other important filings.
• Receives service of process. This role is quite important as it determines where you get served in the event that you get sued. If you have someone acting on your behalf, they receive summons on your behalf. If not, the authorities show up on your doorstep as per the address given during registration.

Who can represent you?

You can choose to receive legal documents or you can designate someone else to take up the role, based on your preference. That is to say that anyone can be your registered agent NY provided that they:

• Have attained the age of 18
• Are capable of entering a contractual agreement
• Have a physical address where you conduct business e.g. they should have an address in NY if that is where you have your business operations
• Can be available during the state’s business hours. This point is especially important as it ensures that you get all documents delivered to you.

Most importantly, you should make sure that the NY registered agent is capable of taking on this task with the seriousness it deserves. Without compliance, you can end up losing your license to operate. It would thus be a good idea to have a professional service handling these processes.

Professional Agents

Do you know what drives many people to having agents for their companies? The state laws! If you are new to doing business or haven’t been in the murky legal waters a long time, you can easily get confused with the requirements. It is thus important that you find a knowledgeable third party to handle these intricacies on your behalf. Here are some good registered agent NY state options:

ZenBusiness – here is yet another service you can count on, that works not only in NY, but other states as well. Thus, should you choose to expand your operations now or in the future, you can rest assured that this company would cover you in another region.

Harbor Compliance – being relatively new on the market, it has served tens of thousands of businesses. The biggest advantages are, first, its premium customer service that assigns each client to a specialist, so you can directly contact a Compliance Specialist via call or email. Secondly, you will get assistance at every level of your business formation process and the company will handle all your legal documents.

BizFilings – this online service is well known for its guides and tools for small businesses. It can help with the formation of a wide range of business types, including LLCs, corporations, and even nonprofits, and guarantees compliance with the state where you are going to operate. One more big plus is that there are no hidden fees.

LegalZoom – with the experience of two decades in the industry and millions of customers, this reputable service knows all your business needs and how to succeed. However, if you are not satisfied with its services, you can get all your money back within 60 days of the purchase.

Step 3: Filing Articles of Organization

At this point, you will not have elected an agent yet. It is now time to do this as you give more details as to your business. These include its purpose, duration, and other aspects that are integral to its formation. You do this by filing the Articles of Organization with the state. Once you get approval, you are free to start doing business. Without approval, you have to go back to square one and start again. Keep in mind that the application fees are non-refundable, hence the need to get it right the first time.

First, you need to get the forms which are available online on the New York Department of State website. You can choose to fill them online or you can download and fill the manually before forwarding them to the state. The forms include the following information which you need to fill before filing:

• What is the proposed name of the business? This name is what you decided on and reserved as we covered in step 1. You should ensure that it meets the guidelines; else, it will not go through.
• Where will you locate your office? The state requires that you show where you will operate your business.
• Where will you receive your notifications? You should have a physical address to which the authorities can deliver legal documents as needed. Please note that this should be a physical location and not a mail box.
• If you choose to have an agent receiving the notifications on your behalf, where will this agent be? Keep in mind that the secretary of state remains as the primary point of contact, even if you elect someone to this position. However, in the event that you have someone taking up this role, you should indicate their address. Also, you should ensure they meet the conditions earlier discussed.
• How will you manage the business? Here, you have two options. The members of the company can take it upon themselves to govern the operations. Alternatively, you can have managers do this on your behalf. Indicate your choice accordingly.
• How long do you plan to start and close the business? If you do not plan on ending your operations, you can leave this option blank and instead, indicate the start date.

We will consider all the filing options as follows:

Online

You can fill the form on the website – New York Business Express.

Mail

Alternatively, you can complete the PDF form and send it to:

New York State Department of State,
Division of Corporations, State Records and Uniform Commercial Code
One Commerce Plaza, 99 Washington Avenue,
Albany, New York 12231

In-Person

You can also deliver the form to:

One Commerce Plaza, 99 Washington Avenue,
Albany, New York 12231

Fax

Fill this form and send it to (518) 474-1418, alongside this authorization form.

How much to file an LLC in new York

All application methods will set you back $200. Online applications take a shorter period. Mail submissions, on the other hand, take about 7 days. If you would rather skip the waiting period, you can expedite the process at a fee.

Step 4: Publishing a Notice

Once you get your license, you should publish a notice of the same on two papers- one weekly and one daily. It should take place within 120 days of registration; else, you could lose your license. The paper will give you an affidavit which you should send to:

New York Department of State,
Division of Corporations, One Commerce Plaza,
99 Washington Avenue, Albany, NY 12231

Additionally, you need to pay a $50 filing fee to the state. Now, once again, we go back to the agent. Publishing can cost you as much as $2000. That is why it helps to engage an agent as cited in step 2. The company can do this on your behalf in another state, enabling you to save quite a lot of money.

Importance

Filing is in your best interests- failure to do so means that you cannot engage the courts to sue when you have a business disgruntlement. You would have to file first before going in to seek justice. Secondly, you lose out in your good standing. That means that if you ever get into trouble, you will already have set a track record of being in the wrong. It is thus more likely that you will end up on the losing side and may not enjoy as much protection as you should.

Cost Savings

It can be hard to part with the required fees, more so where you do not have a third party covering part of the amount. Here are two ways to try and save some coins:

• Actively seek out good deals. Some agencies, such as those we covered, are located in counties where costs may be much lower than those in your location. If you use their addresses, you can save money by engaging platforms that charge reasonable fees.
• Operate then pay. This method works for where you are not sure if your business will take off as expected. You can operate for the first 50 or so days. That should give you an idea of how well you will do in the future. You can then pay using your profits or decide to cancel your license and walk away without using any money.

It helps to take note of the fees charged per county as well as the papers you can use in these regions.

Step 5: Drafting an Operating Agreement

You must protect your business from external as well as internal forces by having some laws in place. Without such policies, you will be at the mercy of the state. Suppose you have some disagreements down the line, you would have to solve this using default rules. Unfortunately, these are not likely to be in your favor as they tend to be generalized. You need to decide beforehand which laws you will use to determine conflicts if and when they arise.

The state will not require you to provide such agreements during your licensing. But if things go south, this is what you can use to protect yourself and other members from general rules that would prove unfavorable to your business.

Here is what you should include:

• Who owns the business? Where the ownership is not equal, you need to clearly show this. It helps in the event that you decide to sell the company or end the operations. You do not want people walking away with less or more than they deserve.
• Who will manage the operations? As we stated earlier, this responsibility can either fall on the members or on selected managers.
• How will you elect people to senior positions or decide on business strategies? You need to come up with voting procedures which go into the number of votes people have and their power. Also, decide on the mode of casting votes.
• How much money have people invested in the business? It should be clear how much people have brought in and how much ownership this accords them. Furthermore, the rules should be clear on how members can raise capital in the future. These should also apply to new members.
• How will you deal with profits and losses? You should decide how much goes out to members, how much remains in the organization and the percentages given to each person. When money comes into the picture, things can get murky fast.
• How will members transfer their ownership? Suppose someone wishes to leave the business, who should get their shares? Do the leaving members get a say of who can buy their shares or do existing members get priority?
• What happens if you can no longer do business? This point is especially important. When people decide to go out of business, a lot goes into this decision. Having some laws in place early on makes it an easier transition.

Not only will these rules make day-to-day operations easier, but they will also afford you protection in the event of legal wrangles.

If you don’t want to write the Operating Agreement yourself, you can hire one of the best LLC services. They will create the most appropriate document for your company

Step 6: EIN Application

An EIN NY is an employer identification number that enables the IRS to keep tabs on you. You should apply for one after you are done getting your license. Always make sure that you have your license first before making an application. Else, you will end up with an ID that does not serve you.

Not every startup needs to apply for EIN NYS. If you are not sure if you should get one, have a look at these conditions:

• Will you hire people in your company? Any business that decides to bring on more people in the way of help will require this ID. However, if you are good to go without any help, you can exist without this ID.
• How many people are in charge of the operations? If you are a sole owner, you do not have to make an application. However, if you have other people with ownership, you will need to make an application.

There are some benefits to this ID, even if you do not have to get one. These include:

• The ease of opening a business bank account. We will get into this step later. A common document banks ask for is this ID, as it helps to prove you are compliant with your taxes.
• The ability to hire help. You might not need people to come in and help you at this stage. But if you do in the future, you must get this ID to go through with it while being in line with the law.
• Privacy. Without this ID, you will probably have to use your SSN more than you would like, which exposes you to identity theft.
• Protection from taking on more liability than you should. Having this ID allows you to enjoy some form of protection in the event that you get sued.

Application

You can get all the information you need from this website. EIN NY state filing options are as follows:

Online

This is the best approach when you are short on time. To send a task to get an EIN, use the website www.irs.gov

However, you may lack adequate information to fill the required fields. In this case, you can use the options below:

Mail

This process gives results in about four weeks. Manually fill the Form SS-4 and send them to:

Internal Revenue Service
Attn: EIN Operation
Cincinnati, OH 45999

Fax

Fill the forms before sending them to (855) 641-6935

Step 7: Opening a Bank Account

An LLC comes with the added advantage of separating you from the business operations. That means that you are not liable for what goes wrong in the business. Here is a way you can mess that up- using one account! If all your income goes to your personal account, you will be personally liable if something goes wrong at work. It thus follows that you should open a bank account for LLC for the following reasons:

• To keep your finances safe in the event that you get sued
• To develop a rapport with the bank, enabling you to get financing
• To exude professionalism and credibility in your dealings with clients and suppliers
• To have an easier time keeping necessary records

Please have the following documents ready:

• Articles of Organization
• A form of ID, one having a picture
• Operating agreement
• EIN

You might need to have more than one member present during the opening, depending on the rules set out in your agreement. It also helps to note that financial institutions abide by different rules. What works for one bank may not work for another and you should always call beforehand to understand your requirements.

Step 8: Tax Registration

Wouldn’t it be nice to operate in the state without having to pay a dime? Unfortunately, that is not the case and you need to comply with the law as follows:

Licenses & Permits

First, you need to understand if your type of operations requires a permit. You might even find that you need to undergo some training before you can start operating.

Taxes

Federal

You have to report your income each year to the IRS, and the report depends on how you pay yourself as an owner. You remember the part where we said that taxes are flexible? This point comes in handy, as it affects even how you file your returns come the end of the year.

State

These taxes fall under employer, sales and industry specific categories. You should understand what you are liable for, depending on what you do. For example, if you have hires, you need to look into employer taxes.

Additionally, every LLC in NY is subject to an annual filing fee. What you pay comes down to how much you make in a year.

Statement

Every two years by the end of the month of your company’s formation, you need to file a statement with the state, covering what you do. This filing costs $9 and can be done online.

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Frequently Asked Questions

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