How To Start An LLC In NY: Best Practices To Follow

Here are the steps to follow when starting an LLC in New York.

One of the main advantages of forming an LLC is that members enjoy limited legal liability. Limited legal liability means that the members are not liable if the business defaults on any loans or is sued.

Instead, owners can use only the assets held by the company to pay off any debts or judgments. This protection is not absolute but can significantly reduce exposure risk. 

Another benefit to forming an LLC is that they are taxed as pass-through entities, meaning that investors only need to pay taxes based on their filings—not on their investment income from the company. This may help attract venture capitalists looking for tax breaks and incentives when investing in startups.

Although forming an LLC has its advantages, there are also some drawbacks. For starters, while it's much more flexible than a corporation, it still requires more paperwork and filing fees than a sole proprietorship does (which requires no formal paperwork). 

Additionally, because it's considered a separate legal entity from its owners, you will need to file additional documents with state agencies like the Department of Taxation and Finance to comply with regulations. 

Lastly, even though members have limited liability protection against debts or lawsuits brought against the company, it's important to note that this protection does not extend to criminal liabilities such as fraud or embezzlement charges.

One of the most important tasks is choosing the perfect name for your LLC. 

The first step when picking a name for your LLC is to check the state database. The database contains all the terms of existing businesses registered in New York, so you must make sure the name you want isn't already taken. You can easily search the state database on the Business Corporations Database website. Once you've found an available name, it's time to move on to step two. 

Once you have an available name from the state database, it's time to search federal trademarks for any potential conflicts or infringements. To do this, go to the US Patent & Trademark Office website and explore their trademark database. If there are no matches in their records, then you can proceed with choosing that name for your LLC.

However, suppose there is an existing trademark similar or identical to yours. In that case, you will need to come up with another option, as having a similar or identical brand could land you in legal trouble. 

Once you have chosen an available name from the state and federal databases, it's time to check domain names for availability. Selecting an available domain name is essential if you plan on having an online presence.

A business plan is a written document outlining your business's purpose and strategies. It provides details about the goals and objectives of your company, as well as how you plan on achieving them. Creating a business plan can be a valuable exercise for new business owners to step back and consider the big picture while also providing an actionable roadmap for the future of their business. A solid and actionable business plan can also make your new business look more legitimate to outsiders, including investors you may want to attract and workers you may wish to employ. 

When creating your plan, think through all the different aspects of running your business, so you're not leaving any key components out. Your business plan should include information about your company's purpose, target market, competitive advantage, marketing strategies, operational procedures, financial projections, and other relevant details. Here are some things to consider when writing up your business plan:

Doing this important work beforehand can help ensure that your new venture sets off on the right foot and gives it every chance at success. A solid foundation outlined by a robust plan can give investors confidence in investing their hard-earned money into something they believe has real potential for growth.

When you decide to expand, it also gives employees faith that there's something substantial behind this new endeavor they're joining forces with.

One of the essential pieces of paperwork you will need to file before you can open your business is an Employee Identification Number (EIN). This number is used for everything, like filing taxes, opening a business bank account, or getting a business credit card.

It identifies your company for tax purposes, allows you to pay employees, and helps with other financial transactions in the name of your business. It also helps protect against identity theft because it's tied to your company's information rather than any individual's personal information. 

An EIN must also be used when you open a business bank account or obtain a loan or line of credit from a financial institution. It's also necessary if you plan on hiring employees or filing taxes as an LLC.

The good news is that obtaining an EIN isn't difficult—all it takes are some basic details about your company and yourself as the owner(s), plus the time it takes to fill out the form on the IRS website. Once everything has been completed successfully, you will receive your nine-digit number via email within minutes.

Another critical step when forming your business is to choose a registered agent. The New York Secretary of State will act as the default registered agent when you start your business, but it's strongly recommended that you change that info to a local trusted contact.

A registered agent is required by law to accept service of process on behalf of your business entity. If your business ever gets sued, the court documents will be delivered to your registered agent and forwarded to you. 

Your registered agent also receives official communications from the state or federal government, such as tax forms, annual report notices, etc. Having a reliable third-party take care of this paperwork helps ensure everything runs smoothly. 

There are two things to consider when choosing a reliable registered agent: a physical address and someone available during regular business hours to receive documents on behalf of your company.

Taxes for an LLC in New York are paid through personal tax filings. If you form an LLC in New York, you will be responsible for paying federal income tax on your income and self-employment tax. The amount of taxes owed depends on how much money the business makes each year and how the IRS categorizes it. 

Here's a breakdown of the different types of taxes to pay.

Every business needs an operating agreement, and you're no exception when you create a limited liability company (LLC) in New York. This document is legally binding and outlines how you will run your LLC. Although it doesn't need to be filed with the state of New York, you should still take this document seriously, as it's vital to running an LLC.

Here are the various sections that form part of an operating agreement.

As a business owner, one of the most important decisions you will make is whether or not to get business insurance. Although business insurance is not required in New York, it can protect you against potential lawsuits and other liabilities that may arise during your business. 

Here are various types of insurance you might want to consider.

Apart from forming your LLC, you will likely need to obtain additional permits and licenses for the operation of your business. 

That includes obtaining any necessary licenses and permits. The process can be complicated and time-consuming, but understanding the basics of the process is essential to ensure that you get all the steps and requirements. 

Before applying for a business license or permit, one must understand the available types. Federal grants and commissions are required by law regardless of where your business is located, while state licenses and permits vary by location. 

Local licenses and permits also differ from one city or county to another; some may require additional licensing even if the state does not require it. Additionally, each industry has unique licensing requirements, so research what applies to your particular business.

Starting an LLC in New York requires you to form a business entity that meets specific legal requirements. 

Once you've done this, you may need to obtain a Certificate of Good Standing, also known as a Certificate of Status, to prove that your company is legally formed and has been adequately maintained. This document can be helpful for things like approaching banks or other lenders for funding, starting your business as a foreign LLC in another state, or obtaining or renewing specific business licenses or permits.

The Certificate of Good Standing aims to prove that you correctly formed your LLC.

It also helps maintain it according to the state's laws and regulations and will include information such as the following:

The certificate will also include an official seal from the Department of State. 

You can order a New York LLC Certificate of Status by mail, fax, or in person. To request by mail, you must complete Form DOS-1339-f and submit it along with a check for $50 made payable to "The Department of State." To order by fax, send Form DOS-1339-f along with credit card information (including type, number, and expiration date) via fax at 518-474-1418.

The filing fee is the first expense associated with forming an LLC in New York. When filing your Articles of Organization, this fee must be paid to the New York State Department of State. The current filing fee for forming an LLC in New York is $200. It’s important to note that this fee must be paid to the “Department of State.”

Once you have completed your Articles of Organization, they must be mailed to the New York State Department of State. The mailing address is One Commerce Plaza, 99 Washington Avenue, Albany, New York 12231

In addition to the filing fee and mailing address mentioned above, other fees may be associated with forming an LLC in New York, such as publication fees or legal fees charged by an attorney who assists with your formation paperwork. It’s essential to research these additional fees before setting up your business so that you are aware of all associated costs upfront.

In addition, here's how to start an LLC in Indiana and start LLC in Wisconsin.