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by Mike Vestil 

Navigating The LLC Formation Process In New York

Are you thinking of starting a business in New York and don’t know where to begin? An LLC, or Limited Liability Company, is the most common type of business structure for entrepreneurs. It is an unincorporated business organization of one or more persons with limited liability for the business's contractual obligations and other liabilities. This blog post will cover all the basics about forming an LLC in New York.

How To Form An LLC In New York

Here are the steps you need to take to form an LLC in New York.

Articles Of Organization

To form an LLC in New York state, you must first file your Articles of Organization with the Department of State. This document officially creates your LLC and outlines essential information, including its members and purpose. Keep in mind that there are certain restrictions on what type of activities can be conducted under an LLC.

Make sure to check with the Department of State before filing your Articles of Organization. Suppose you are registering a Professional Service Limited Liability Company (PLLC). In that case, you must include additional documents, such as a Statement Of Qualification verifying that each member is authorized to practice their profession.

In any case, Form DOS-1336 is the form that must be completed and submitted to the Secretary of State Office. It includes fields such as the name of your company, its county location, and other important information related to your LLC. Additionally, you will need to provide a signed organizer address. This should be the address where all official correspondence from the state will be sent.

Once the Secretary of State's office receives your application, it will be reviewed for compliance with New York State requirements for forming an LLC. For it to be approved, all conditions must be met. This includes filing articles of organization with the state, designating a registered agent, paying applicable fees, and obtaining any necessary licenses or permits for conducting business in New York State. The state may not approve your application if these requirements are not met.

Operating Agreement

Once your Articles Of Organization are filed, you must create an Operating Agreement between all members involved in the company. This document establishes rights, powers, duties, and obligations between each member and concerning the LLC itself. It should also outline any significant decisions affecting the company, such as how profits are distributed amongst members or how essential findings should be made.

An operating agreement establishes clear expectations for all owners and helps protect them from legal liabilities and disputes. The document lays out how decisions will be made and what happens when disagreements arise, providing clarity if any legal issues happen in the future. This ensures everyone is on the same page and provides guidance if anything goes wrong. Additionally, some states require LLCs to have an operating agreement before receiving certain benefits, such as tax breaks or protection from personal liability.

At a minimum, your operating agreement should include information about:

  • management structure (member-managed vs. manager-managed)
  • ownership (percentage owned by each member)
  • capital contributions (amount each member contributes to start-up costs)
  • voting rights (who has decision-making authority)
  • profit/loss distribution (how profits/losses are divided among members)
  • meetings/record keeping requirements (how often meetings are held and who keeps records)
  • And dissolution procedures (what happens if one owner leaves or wants to end their involvement with the business).

Depending on your situation, you may need additional provisions or clauses, such as non-compete agreements or dispute resolution policies.

Notice Of Formation

Under Section 206 of New York law, all newly formed companies must publish a notice announcing their formation of two newspapers designated by the county clerk within 120 days after formation; failure to do so results in suspension of authority to transact business until publication requirements are met. Lastly, once all these steps have been completed, you must file a Certificate with The Department Of State, which serves as proof that all necessary steps were taken for the formation and compliance purposes.

Understanding The New York Department Of State And Registered Agents For Your LLC

A critical part of the formation process is understanding the role of the New York Department of State (NYDS) and registered agents. The NYDS serves as your entity's "agent for service of process," which allows them to accept and forward any legal documents sent to your LLC.

The Role Of The NYDS In Your LLC Process

The New York Department of State plays an essential role in forming an LLC in New York, serving as your entity's official "agent for service of process." All legal documents related to your company will be sent to the NYDS, which will serve as a middleman between you and any other parties involved. The copies sent to this agency will then be forwarded to you, ensuring that no critical papers are missed or lost in the mail. It's important to note that while the NYDS will accept and deliver these documents, they cannot provide legal advice.

Registered Agent Services

In addition to appointing the NYDS as your agent for the service of process, many entities also choose to select a registered agent who can provide additional services related to their business.

Such services include accepting payments or managing correspondence with vendors. A registered agent can either be a resident or a commercial agent; each has advantages and disadvantages depending on how much control you want over your business operations. For example, a resident agent provides more personalized services but may not have enough capacity if your business grows.

Conversely, hiring a registered commercial agent gives you access to more resources but may come at a higher cost than what you might be able to afford as a startup business.

The Costs Of Starting An LLC In New York

From filing and biennial statement fees to registered agent services and legally required notices, you should consider many hidden costs before beginning the formation process. Let’s break down these costs and how they may affect your business budget.

Filing Fees & Biennial Statement Fees

Forming an LLC in New York can be done online with a filing fee of $200. Additionally, biennial statement fees cost $9 and must be paid during your company’s formation anniversary every other year. Filing failure fees are also applicable if you fail to file or pay on time, so stay on top of this requirement if you don’t want to incur additional costs.

Legally Required Notices

Once your LLC is formed, you must publish legally required notices which come at the cost of up to around two thousand dollars due to varying publishing prices depending on location. 

These notices are generally posted in local newspapers or journals over five weeks after registration with the Secretary of State office is complete. This cost can vary depending on publication rates, so research ahead of time to know precisely how much this step will cost your business.

Certificate Of Publication Fee

Another fee that LLCs in New York must pay is for the Certificate of Publication, which certifies satisfaction. This document proves that your organization has been registered and that you have satisfied all requirements within the state. The cost of obtaining this certificate is $50.

Name Reservation Fee

In addition to filing a biennial statement and obtaining a Certificate of Publication, you will also need to reserve a name or fictitious business title if necessary. To do this, you will need to pay a fee of $20 for booking your name and another $25 for booking your fictitious business title if applicable.

Foreign LLC Status Fee

Finally, if you are looking to register your organization as a foreign entity (meaning it already exists in another state but wants to “expand” into NY), then there is an additional fee that must be paid via Application For Authority which costs $250 total.

Understanding The Costs Of maintaining An LLC In New York

There are several costs associated with maintaining a foreign LLC in New York. 

One of the first fees you will need to pay when forming an LLC in New York is for the biennial statement. This statement must be filed every two years, including information about your company, such as its name, address, number of members/managers, and more. The fee for filing this statement is only $9 per year – making it one of the most affordable filings associated with creating an LLC in New York.

This may seem like a lot, but it does not have to be complicated.

Professional services can make forming an LLC easy without extra work from you other than paying the standard fees when needed, such as when changes are made or when foreign LLC status is required.

Choosing The Right Notice Of Intent To Form An LLC In New York

To form an LLC in New York State, you must publish a notice of formation. To meet these requirements, you need to include specific information, such as the name and purpose of your LLC, its principal office address, its duration (if not perpetual), and the name and address of your LLC’s registered agent. 

You also have to list the names and addresses of all authorized members to manage the LLC's affairs. Additionally, suppose you are planning on conducting business outside New York State within 120 days of the publication date. In that case, you must also include that information in your notice.

Once all the required information is gathered, there are two main options for publishing notices - traditional print newspapers or more modern online legal forms. When choosing which choice is correct, consider both cost and convenience factors. For example, conventional print publications can be expensive ($100-$400), but they provide long-term recordkeeping solutions and comply with court standards if needed later down the line. On the other hand, online legal forms are much cheaper (as low as $10). Still, they may lack specific formatting requirements, such as physical size or typeface, that some courts may require when considering official documents like notices of formation for an LLC.

The Pros And Cons Of Starting An LLC In New York

Here are the pros and cons of forming an LLC in New York.

The Pros Of Forming An LLC In New York

The most significant benefit of forming an LLC is gaining protection from personal liability. Any lawsuits or debts incurred by your business entity are not held against you. Additionally, setting up an LLC offers several tax advantages, including pass-through taxation, which means that profits made by the company are taxed only at the individual owner level rather than at the corporate level. 

Setting up an LLC also allows for flexibility regarding ownership and management; there is no set number of members or restrictions on who can own or manage the company. Finally, establishing yourself as an LLC gives you credibility and makes you appear more professional to customers and partners.

The Cons Of Forming An LLC In New York

One major downside to forming a limited liability company is the cost associated with setting up such a business entity. You must pay fees to both state and federal governments and filing fees to keep your business registered with both entities. It also requires more paperwork than other types of companies - such as sole proprietorships – making it time-consuming to set up. Additionally, specific compliance requirements must certain compliance requirements must be met to remain legally compliant, which can add extra costs if you don’t have someone experienced in these matters helping out along the way.

Naming Your New York LLC: What You Need To Know

Here are the steps to ensure your LLC’s name is unique, accurate, and meets all NY state requirements.

Name Requirements

Your business name must include “Limited Liability Company," "LLC," or “L.L.C.,” and another business cannot already take it in the New York State. Additionally, specific restricted terms may require extra paperwork for registration, so do not forget to check that!

URL Availability

It is essential to ensure that the URL you would like for your website is also available; this will be necessary for online presence and marketing/advertising purposes. It would be wise to reserve the desired firm title up until two months after submitting a fee application – just in case someone else decides they want the same one first! This will provide ample time to decide on an alternate name if needed.

New York LLCs: Appoint A Registered Agent For Added Protection

Starting and operating an LLC in New York requires more than just paperwork. To ensure that legal documents are efficiently delivered, all entities must provide the state with a valid address to route any necessary attention. 

But what if your business cannot receive these documents during regular business hours? This is where appointing a registered agent can help protect your business from potential legal issues.

A registered agent (or resident agent) receives legal documents such as service of process and other vital communications on behalf of their clients. The registered agent will receive and then forward the documents to the client so they know of any potential legal matters impacting their LLC. To be considered a valid registered agent, the person or entity must be based in NY at all times during regular business hours so they can appropriately act on behalf of the company upon receiving service of process or other essential communications.

A reliable registered agent will provide your business with an extra layer of security and protection. Having someone available to accept and promptly forward these documents lets you know your legal matters are being handled promptly and efficiently. The importance of this cannot be overstated. If you don’t have someone who can accept these crucial documents, you could miss out on important information or deadlines related to your LLC’s operations. 

A registered agent also serves as an intermediary between the company and its members/managers, which helps ensure there is no confusion or miscommunication about any legal proceedings occurring behind the scenes.

The best way to find a reliable registered agent is by researching companies that offer this service in New York. Make sure that the company has experience dealing with LLCs and an established record of providing prompt service when it comes to accepting service of process and other communications on behalf of their clients. Additionally, remember that many companies offer discounts for setting up multiple accounts with them. So if you anticipate needing more than one registered agent in the future, it might be worth considering signing up with one provider immediately rather than trying to find multiple ones separately down the road!

Other Key Considerations When Forming A New York LLC

Here are some final considerations to keep in mind.

The 120-Day Rule For Starting An LLC In New York

When setting up your LLC, you should also be aware of the "120-day rule." This critical requirement states that within 120 days of forming your LLC, you must have copies of your Articles of Organization published in two newspapers designated by the county clerk. Furthermore, affidavits from each newspaper and Certificates of Publication must then be filed with the New York Department of State for record keeping. Read on to learn more about this critical process.

The first step is to choose two newspapers designated by your county clerk as suitable for publishing legal notices. These newspapers are typically local publications such as community or weekly papers. You can contact your county clerk's office directly or visit their website for a list of approved publications in your area.

Once you have selected two publications, it is time to prepare the paperwork for publication. You will need to provide information about your business name, address, purpose, date and place of formation, and other relevant details. In some cases, the newspaper may require additional documents, such as a copy of the Articles of Organization or a statement verifying that all requirements for forming an LLC have been met.

Filing Affidavits & Certificates

After your notice has been published in both newspapers, you will need to file affidavits from each newspaper with the New York Department of State and Certificates of Publication for record-keeping purposes. 

The testimonies will confirm that the advertisement was printed by state law and contains all necessary information about your business entity. The certificates will prove that your business has fulfilled its obligations under this rule and is compliant with state regulations governing LLCs.

Conclusion

Starting an LLC in New York can be complex, but knowing what's involved can make it much more straightforward.

The above steps should serve as a general guideline for registering and forming an LLC in New York. It's essential to be aware of the requirements and regulations that apply to you to form your New York LLC successfully.

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About the author 

Mike Vestil

Mike Vestil is the author of the Lazy Man's Guide To Living The Good Life. He also has a YouTube channel with over 700,000 subscribers where he talks about personal development and personal finance.

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