Are you looking to form a limited liability company (LLC) in New York, but you’re not sure how the process works? There are several important steps to create a compliant New York LLC that can do business in the state.
To get started, please reference our 6-step guide below or hire an affordable online LLC formation service.
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What is a New York LLC?
The New York LLC is one of the most popular business structures in the state. It’s a more casual and flexible type of business than a corporation, but includes the personal asset protection that’s lacking from sole proprietorships and general partnerships.
LLCs in New York have simple formation and maintenance requirements, several options for how they can be taxed, and flexible management. From one-person businesses to multi-member LLCs with several owners, the LLC is a popular choice for a reason.
Setting up a brand-new New York LLC in 6 Steps
For the first part of this guide, we’ll cover the 6 essential steps to setting up a New York business that doesn’t have employees yet. These steps also apply to businesses with employees, but we’re keeping things streamlined to start. If you do have employees, make sure you complete these steps and the steps for employers (which we’ll cover later in the guide).
Step One: Choose a business name
Your LLC’s name is often the first impression you get to make on potential customers, and therefore it goes without saying that this is an important step. There are a few different aspects to consider when naming your business.
In the state of New York, you’re required by law to meet several requirements for your business name. Here’s a quick glimpse at the rules for LLCs:
- Your name must include the phrase “Limited Liability Company” or the abbreviation “LLC” or “L.L.C.” (no other variations are permitted)
- Your name must be “such as to distinguish it from” the names of other entities operating in the state
- Your name cannot include phrases that are forbidden by law, such as “board of trade state police” or “incorporated urban location” or other phrases (see the law for the full list)
For more information on naming rules in New York, please consult the Limited Liability Company Name Section of the state’s Limited Liability Company Law.
Another aspect to consider is including language that explains what your business does ― for example, if you’re starting a coffee shop, put the word “coffee” or “brew” in your LLC name. Additionally, if your business has strong values like being environmentally friendly, you can indicate that by including the word “green.” This helps potential customers know exactly what to expect from your business.
Once you’ve picked the perfect name for your business, you don’t want to lose it to another aspiring entrepreneur. Thankfully, New York allows you to reserve your business name if you’re not quite ready to register your business. To do that, you’ll need to file the Application for Reservation of Name form and pay a $20 fee.
Filing this reservation protects your chosen name for your exclusive use for 60 days. Your can learn more about name reservations here.
Step Two: Appoint a Registered Agent
Every LLC in New York is required to designate a registered agent, which is the individual or registered agent service that receives government correspondence on behalf of your business, then forwards those documents to you.
When you appoint a New York registered agent, here are the state requirements to be mindful of:
- Every entity that files with the Secretary of State (both domestic and foreign) must appoint a registered agent
- The agent must be an individual resident of the state OR a corporation with authority to operate in the state
- An agent must be continuously maintained
- If you prefer, you may let the Secretary of State serve as your agent, providing a forwarding address instead
You can find a full rundown of the state laws here.
Without a registered agent, you could lose your good standing with the state of New York, and the state also has the right to dissolve your LLC if they decide to. In a worst-case scenario, you could miss the alert regarding a lawsuit against your company, which could even lead to a judgment against your business because you didn’t defend yourself.
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Step Three: File Formation Documents
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Once you are ready to form your New York limited liability company, you will fill out the Articles of Organization. You can either do this on your own or hire a New York LLC service. Some services, like ZenBusiness, even offer discounts on their service.
This is THE document that will register your LLC with the state. You’ll want to ensure all of the following information is correct on the form:
- Your chosen business name
- The county where your business will be located
- Name and contact information of your registered agent
- Name, signature, and contact information of the individual filing the form
New York keeps the process of filing your Articles about as simple as it gets; compared to other states, it’s a very short form with basic information about your business. As long as you fill out the information requested, you’re pretty much set to go.
That said, it’s the step that immediately follows the Articles of Organization that’s a tad tricky: you are required to submit a Certificate of Publication within 120 days of filing your Articles. But to be able to file the Certificate, you have to place a written notice about the formation of your business in two local newspapers. Essentially, this process informs the public that you’re doing business, what your company name is, and so on. We recommend completing this step pretty quickly so it doesn’t get lost in the shuffle.
- Total cost: $250 ($200 for the Articles of Organization and $50 for the Certificate of Publication)
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Step Four: Draft an Operating Agreement
After you register an LLC in New York, create a detailed outline that explains how you will run and manage your new business. Even though it doesn’t need to be filed with the state, put one together and keep it for your records.
When you open a bank account, you may be asked for this document in order to open an account. You’ll also want to keep in mind that any future business partners or managing members may also be interested in seeing your Operating Agreement before joining your company. After all, this document essentially serves as your overall plan for success.
An attorney can help you outline your Operating Agreement or create one from a free template online. You can read more about Operating Agreements, but some of the basic information you’ll want to have includes:
- Individual members’ ownership percentages
- Rights and responsibilities
- Voting powers and meeting guidelines
- Allocation of profits and losses
- Management rules for the LLC
- Provisions for buying a member owner out, or transferring their shares in the case of illness or death
Step Five: Get Licenses & Permits
New York law requires an LLC to obtain all necessary licenses and permits before starting operations. State law also decrees that an LLC can only provide one specific type of service. All owners of the LLC must be licensed or registered to provide the specific service under which the LLC was assembled.
The type and cost of the permits that your business may require varies depending on the nature of the services your LLC offers. Some businesses won’t even need licenses. That’s especially true since New York does not have a statewide general business license.
However, there is a good chance you will need to get an industry-specific license or permit; New York has more than 1,200 regulated professions, from adult care facilities to real estate appraisers and many places in between. To learn what licenses apply to your business, we recommend consulting the Licenses Database.
Last but not least, you should check with your city or county to see if they maintain any licensure requirements.
Obtain a Business Bank Account
One of the most important aspects of running an LLC is ensuring that your business funds remain separate from your personal finances. And to do that, you’ll need a separate bank account for your business.
Obtaining a business bank account is pretty simple, and you can choose the financial institution you like best. Some banks will ask to review your LLC’s operating agreement, and some also ask to see your EIN (see the Employers section below). Once you have your account, you’ll be able to get checks, make payments using your business card, and so on.
If you failed to get a business bank account, you would technically be blurring the line between your personal accounts and your business accounts. That compromises your personal asset protection.
Next Steps for Newly-Formed LLCs
1. Prepare for tax time
Regardless of how far away April 15th is, it’s never too soon to prepare for tax time and setting up accounting software. As an LLC owner, the exact tax rates you’ll pay depend on the taxation structure you choose for your business. If you choose to be taxed as a corporation, the LLC itself will pay taxes from its own funds. Meanwhile, LLCs taxed as pass-through entities don’t technically pay taxes; its members do. The profits are distributed to the LLCs members, and each member reports that income on Schedule C of their personal taxes.
If you choose to be taxed as a corporation, you’ll pay the following rates:
- Federal: 21%
- State: 6.5%
Meanwhile, LLCs taxed as pass-through entities pay these rates:
- Federal: 10-37%, rising on a fixed-bracket scale
- State: 4-8.82%
In order to compliantly file and pay your taxes, you’ll fill out a complete copy of federal Form 1065 including all federal K-1s, statements, and attachments. At the state level, businesses taxed as corporations will file form CT-3, while pass-through entities use form IT-201. If you’re anticipating these filing requirements, they’ll be much easier to manage when their due date comes.
If you’re involved in retail sales, you’ll also be expected to collect and pay the state sales tax (4%). Last but not least, you need to check if any of the state’s miscellaneous taxes apply to your business. For example, New York charges fees for paper carryout bags, petroleum, and more. For more information about these taxes, check out the New York Department of Taxation and Finance.
Because taxes can be incredibly complicated, we highly recommend consulting with a business attorney or accountant to ensure that you cover all requirements on the state and federal level.
2. Be ready to file your annual report
All business owners operating in New York must complete a biennial statement. Not only does this document demonstrate that your business is still open, but it also updates the state regarding any pertinent information about your business that may have changed over time.
In New York, all you really have to do is file the form online by the due date, which rolls around every other year by the end of your LLC’s anniversary month. The filing fee is just $9.
3. Consider business insurance
The big advantage to the LLC is that it offers you personal asset protection. But that doesn’t mean that mishaps won’t happen along the way. We highly recommend obtaining a general liability policy with the right coverage for your business.
In the event of a mishap or natural disaster, an insurance policy can help you navigate unexpected expenses. Be sure to compare your different options to get the best coverage for your particular type of business.
Extra Steps for Businesses with Employees
When you’re operating as a one- or two-person show, operating a business is relatively streamlined. Things get more complicated when you bring employees into the picture, but employees also help raise your business to new heights. But to reach those heights, you need to comply with employee-related legal requirements.
Step One: Address employee-related taxes
Any business with employees must obtain an EIN, or an Employer Identification Number. This is a free registration with the IRS, and the number acts a lot like a social security number for a business. Obtaining the number also lays the groundwork for other taxes, such as social security and withholding taxes. For example, you’re required to withhold income taxes from employee paychecks, make social security and medicare tax payments, and pay unemployment fund taxes. For more information on employer taxes at the federal level, look here.
There are similar taxes on the state level. For example, New York requires withholding taxes, contributions to the unemployment insurance fund, and more. We recommend consulting with the Department of Taxation and Finance and the Department of Labor to learn what taxes apply to you and your business.
Step Two: Obtain additional insurance
Every New York business with employees is strictly required to get workers’ compensation insurance. For more information on this policy requirement, check out the Workers’ Compensation Board.
If you haven’t already obtained a general liability policy, we highly recommend that you do so when you bring employees into the business. The more people you have involved in a business, the higher your risk of needing general liability insurance.
Of course, proper care and discretion will eliminate most problems, but incidents happen—from faulty products to an employee slipping and falling and theft and many places in between. And in some cases, insurance can be the difference between a minor hiccup and a budget-breaker.
Step Three: Enlist Help
For some entrepreneurs, part of the fun of running a business is the opportunity to wear lots of different hats: accountant, manager, marketer, quality control expert—it’s a near-endless list. And if your business is still pretty small, you might be able to handle many of these tasks yourself, especially if you’re prepared with a business administration degree.
But if you aren’t (and it certainly isn’t a prerequisite), some of these tasks may leave you feeling overburdened or out of your depth. For instance, navigating employer-related taxes might steal valuable time that you’d rather spend promoting your business or developing a new product. An accountant or tax attorney, however, knows those tasks like the back of their hand. You may decide it’s worth the added expense to enlist their help.
Ultimately, it’s your decision whether to bring in professionals or DIY. But in our opinion, it’s often worth it to get help from specialized pros.