Forming your business into a(n) Limited Liability Company (LLC) may be the best option if you want to expand your sole proprietorship or start a new business in New York. An LLC is a business structure that separates your business assets from your personal assets.
LLCs are legal entities on their own, meaning owners and members aren’t held responsible for their legal liabilities, taxes, and debts. Starting an LLC in New York is simple, fast, and cost-effective.
Six steps required to form an LLC in New York:
1. Name LLC
Naming your business is the first step when starting your LLC in New York. The New York naming procedures require you to:
- Include the phrase Limited Liability Company or the abbreviations L.L.C., or LLC in your company name.
- Choose a name that won’t confuse your LLC with any government agencies like the CIA, FCC, Treasury, FTC, State Department, FBI, or others.
- Check name availability in New York by conducting a FREE state name search on www.ny.gov.
- Pick a name with an available URL. It’ll come in handy when creating your website.
- Choose a name that can also function as a social media handle.
Use IncFile to Complete Formation Process
After coming up with a name for your New York LLC, you can bypass the rest of the steps by using a third-party service such as IncFile or ZenBusiness to assist with completing the formation processes.
IncFile simplifies the formation process by taking care of a lot of the time-consuming tasks for you, such as drafting the Articles of Organization, creating an Operating Agreement, hiring a registered agent, state filing fees, and more.
2. Appoint a Registered Agent
All New York LLCs are required to have an appointed registered agent. It may be an individual such as yourself or an employee, or an organization licensed to do business in New York.
The default registered agent in New York is the Secretary of State, which remains the first point of contact even if you appoint a different registered agent.
A registered agent is responsible for sending and receiving important legal documents such as lawsuits, tax forms, government correspondence forms, and other paperwork on your behalf.
Benefit of Appointing a Separate Registered Agent in New York
Appointing a separate registered agent could save you money when it comes to publishing your notice of formation in New York, which is a requirement for all newly formed LLCs that costs around $1,500 if the principal address is in New York City.
If you elect to use a registered agent service outside of New York City, using their address as your principal address would significantly reduce publication costs.
Get a Registered Agent FREE for One Year
IncFile provides a registered agent service FREE for one year after you form your New York LLC through their website.
3. File Articles of Organization
Creating and filing your Articles of Organization with the Department of State is the next crucial step. It’s a legal document that is required when starting a business in New York. You’ll need to file Form DOS 1336-F online, by mail, fax, or in person, and a non-refundable fee of $200 will be charged.
A crucial decision that is made when drafting the Articles of Organization is deciding whether the LLC will be manager-managed or member-managed.
Member-managed LLCs usually have a small number of members and they’re ready to be involved in the daily operations of the business. An LLC is manager-managed when there are large numbers of members that don’t want to be involved in the daily operations of the business.
4. File Certificate of Publication
To start an LLC in New York, you must publish a notice of formation within the first 120 days of doing business for six consecutive weeks. You have to:
- Publish the notice in two different newspapers (one daily and one weekly newspaper).
- Must be approved by the local county clerk’s office.
- Must be published in the county of the LLC’s principal address.
Once the newspapers publish your notice of formation, they will provide you with an affidavit of publication.
You must submit both your certificate of publication and affidavits of publication to the New York Division of Corporations.
We recommend using ZenBusiness as your Registered Agent to save on publishing fees.
ZenBusiness’ Registered Agent Service has a business address in Albany, where newspaper publishing fees average from $80-$100 compared to New York City’s fees which can range anywhere from $1,500 – $2,000.
5. Create an Operating Agreement
It’s a requirement for all LLCs operating in New York to have an operating agreement. An operating agreement is a verbal or written internal legal document that summarizes an LLC’s ownership and operating procedures. It plays a crucial role in conflict minimization and ensures employees and the owners are on the same page and know what to expect from both ends.
Operating Agreements usually entail the following:
- Organization: Defines who the members are, the ownership structure, and where and when the business started.
- Management and voting structure: This shows the voting procedure and who the management is. (i.e. if member-managed or manager-managed.)
- Capital contributors: Involves the funding plans for the future and the members supporting the LLC.
- Distributors: It outlines the ratios of sharing profits and losses between members.
- Membership changes: Shows what to do when transferring ownership of shares and adding or removing members.
- Dissolution: The conditions under which the LLC can dissolve.
6. Obtain an New York LLC EIN from IRS
An Employer Identification Number (EIN), also called Federal Tax Identification Number (FTIN) is a social security number given to businesses by the Internal Revenue Service (IRS). It allows the IRS to identify and keep track of companies and their tax status.
An EIN is also a requirement by the state for you to open a business bank account, employ workers, and file taxes. IRS provides EIN for free to LLC owners after formation. Obtaining an IRS is simple because you can apply for it online or by mail. You should get a new EIN when converting your sole proprietorship to an LLC.
Obtaining Additional Licensing in New York
Your LLC must have a business license to operate in New York. You can apply for this license online with the licensing and regulatory agency for business. Also, you’ll need a Certificate of Authority for Sales Tax, commonly known as a Seller’s Permit. Get this license free from the Department of Taxation and Finance for your LLC to be operational.
Additional licenses vary depending on your profession and operating region. You should check with the local government office to see whether you’ll need more permits.
Steps After Forming New York LLC
Open a Business Bank Account
Open a business bank account to separate your personal and company assets. It will help you keep them free from lawsuits and avoid confusion when calculating tax and net income.
Get a Business Credit Card
Getting a separate business credit card will help you avoid a lot of confusion resulting from a shared credit card. You’ll keep track of your LLC’s expenses and build a business credit store. It’s also helpful when it comes to tax purposes.
Hire an Accountant
An accountant will help save a lot of money on taxes, avoid fines and penalties, and track losses and profits. You may not have the time to do all these activities on your own and it may cause losses you could avoid once you hire an accountant.
Get a Business Insurance
You’ll need to insure your LLC with a reputable insurance company to help you cover some unavoidable risks. The coverages you ought to have include:
- General Liability Insurance: A general insurance policy that covers your LLC against common risks like public property damage or injury.
- Professional Liability Insurance: It protects experts and professionals such as accountants and lawyers from negligence claims made by clients.
- Workers Compensation Insurance: Provides medical cover to employees who get sick or injured from work-related activities. Also, it provides additional benefits like missed wages replacement, death, and disability wages.
Use IncFile to Complete Formation Process
You can use IncFile as your third-party gold plan. It offers the following:
- Cover filing state fees
- File and prepare Articles of Organization
- Do limitless name searches
- Registered agent service free for the first year
- EIN business tax number
- IRS form 2553
- Operating Agreement
- Bank resolution
- Lifetime company alerts
- Business banking accounts
- Online access dashboard
- Unlimited phone and email support
New York Tax Filing Requirements
The state of New York requires all LLCs to:
- Apply for a Seller’s Permit or Sales Tax Certificate of Authority: All businesses selling physical products must apply for a seller’s permit to be operational in New York.
- Register for Employer Taxes: LLC owners with employees must file for Unemployment Insurance Tax with the New York Department of Labor and Employee Withholding Tax with New York’s Department of Taxation and Finance.
File New York LLC Biennial Statement
It’s a requirement for all New York LLCs to file a biennial statement online every two years with the New York Department of State. Biennial statements are due every two years by the end of the month that your LLC was originally formed, and the filing fee costs $9.
Late filings of any kind will result in the automatic loss of the LLC’s “good standing” status with the state.
Federal licensing is required by businesses under the Federal government. If your LLC doesn’t fall under this category, you don’t need it. Examples of LLCs that must have a federal license include:
- Wildlife and fishing
- Ammunition and firearms
- Tv broadcasting
- Nuclear Energy
Federal Tax Filing Requirements
It’s a requirement in New York for all LLCs to make an annual report of their total income to the IRS. They must file:
- Form 1065 Partnership Return: It’s filed by most multi-member LLCs.
- Form 1040 Schedule C: It’s filed by most single-member LLCs.
New York is a city that supports all forms of business structures. However, for a startup, an LLC is among the best options. The formation process is easy and simple. It also protects your personal assets from company-related liabilities.
For a hassle-free process, you can choose a name for your LLC, and then appoint a third-party service such as IncFile or ZenBusiness to help you complete the remaining steps and save you tons of time and money on lawyer fees, state filing fees, and more.