Because a limited liability company (LLC) combines many advantages of partnerships and limited partnerships with some of the advantages of a corporation, an LLC is a popular choice for business structuring. The advantageous characteristics of an LLC include:
- Pass-through taxation, meaning that the LLC’s profits are only taxed as part of the members’ income and not as a separate business;
- All owners of the LLC, who are referred to as members, will have limited liability.
In the State of New York, all limited liability companies created must follow New York limited liability company laws. The owners of the corporation are not personally liable for the obligations of the corporation and any court-awarded damages.
One of the drawbacks of LLCs is the double taxation that corporations incur. This means that profits are first taxed to the corporation once business profits are earned.
When the shareholders get dividends, those profits are taxable to them as capital gains income. The benefits of limited liability companies are similar to those of corporations because the assets of the owners are protected against creditors or lawsuits that are brought against the LLC.
In addition, an LLC is not subject to entity-level taxation, unlike a partnership. LLCs do not pay taxes as corporations do.
The members who make a profit are the only individuals who pay taxes. It is important to note that forming an LLC does have drawbacks.
Because of the liability of LLC arrangements, the owners can be held liable for their own negligence. If an individual has any questions regarding forming an LLC in New York, they should consult with a local New York attorney.
What Conditions Must an LLC Meet?
The Secretary of State of the State of New York upholds numerous regulations for LLCs in New York. An LLC is required to have at least one member, although a member is not required to create an LLC.
The phrases “Limited Liability Company,” “LLC,” or “LLC” must appear in the name of an LLC if it does not provide a professional service. The name of an LLC may also end with “PLLC,” “PLLC,” or “Professional Limited Liability Company” in place of “Limited Liability Company” if it does provide a professional service, for example, a veterinary care clinic or dentist.
The name of the company must also be distinct from other names that are already in use for businesses that have state registrations. It is important to note that there are also terms that cannot be used in the name of an LLC in New York. These terms include urban development, corporation, and lawyer.
There is a complete list of words and phrases that are forbidden in Section 204 of the New York Limited Liability Company. Additionally, a written operating agreement that defines the obligations of its member must be adopted by the LLC within 90 days of its creation pursuant to New York laws.
An LLC must also choose which county it wishes to be governed by. The owner must also submit the appropriate papers to the New York Secretary of State in order to be permitted to run their business as an LLC in the state.
Unless the LLC is a theatrical production firm, the LLC must publish notice of its existence in one weekly newspaper and one daily newspaper for six consecutive weeks after the required papers have been submitted.
What Are the Steps to Form an LLC?
In order to form an LLC in New York, the organizer is required to submit the required documentation to the Division of Corporations, State Records, and Uniform Commercial Code of the New York State Department of State. Standard domestic LLCs, domestic professional services LLCs, standard foreign LLCs, and foreign professional services LLCs all have various documentation requirements.
If an LLC was founded in New York, it is considered to be domestic. If it was founded in another state or nation, it is considered to be foreign.
An LLC for domestic professional services is required to file a Professional Services Articles of Organization. A typical domestic LLC, on the other hand, must file Articles of Organization.
The information required for both forms is very similar. The following information must be included on either of these forms:
- The company’s name;
- The jurisdiction where the LLC will keep its main office;
- A trustworthy postal address for the LLC where copies of legal documents submitted to the Secretary of State for the LLC can be mailed;
- The signature of the individual or organization creating the LLC; and
- The place where the organization or individual filed its Articles of Organization.
The professional that a professional services LLC will practice in addition to any individuals or registered professional companies, including the names and addresses of the owners, managers, and directors of the companies who will be the initial members or managers of the LLC, all have to be listed on the Professional Services Articles of Organization form. There are different forms that are available for conventional international LLCs as well as foreign professional services LLCs, similar to domestic LLCs.
Both types are required to submit a Professional Services Application for Authority, while the first type must complete an Application for Authority, which includes:
- The original name of the LLC;
- A backup name in case the original name does not comply with the naming regulations in New York;
- The location and date of the LLC’s formation;
- The county it will be governed by; and
- The mailing and principal office addresses.
In addition to the address and signature of the filer, the form also has to include the name and address of the government organization the LLC initially registered within the jurisdiction in which it was formed. A Professional Services Application for Authority must include:
- The name of the LLC and its alternate name in the event that the LLC’s original name does not comply with New York law’s name requirements;
- The date and location of the LLC’s formation;
- The profession the LLC intends to practice;
- The city and county in New York where the LLC will have its office; and
- The LLC’s mailing address.
If it has one, each professional that is involved in the LLC, similar to an LLP in New York, must disclose their name, address, and New York State license number. The Professional Services Application for Authority has to be signed and include the address of the individual who is submitting it.
Foreign professional services LLCs and conventional foreign LLCs must submit their Applications for Authority that include a Certificate of Existence. Once the required notice has been published, each LLC also has to submit a Certificate of Publication.
How Much Does It Cost to Create an LLC?
Currently, in New York State, forming an LLC costs $200.
How Long Does It Take for an LLC to Be Approved?
If an individual is submitting their documentation online, the formation of the LLC will be immediate as long as the documents are fully completed and correct. If an individual applies through the mail, it can take as long as seven business days.
What Are the Benefits of an LLC in NY?
The State of New York does not mandate that LLCs have a registered agent, which is different from most states. Instead, the Department of State serves as the agent for any LLC in New York.
This means that registrants have one less concern when they are registering an LLC in New York.
What Drawbacks Does an LLC Face in New York?
There are some drawbacks for LLCs in New York. Every other year, every LLC in New York has to submit a Biennial Statement.
If an LLC fails to submit a Biennial Statement, it will be noted on any certifications of good standing that the LLC may request. In addition, the LLC may incur a $250 late fee.
Where Do I Locate the Best Lawyers?
If you are considering creating or registering an LLC in the State of New York, it is essential to consult with a corporate lawyer in New York. Your lawyer will help ensure that what can be a challenging and confusing process is completed properly and as efficiently as possible.
Your lawyer can also advise you regarding the different business classifications available in New York and which one may best suit your needs. Having a lawyer help you will give your business the best start possible.