An LLC is a business structure that combines the best features of both corporations and partnerships. An LLC is a separate legal entity from its owners, which means it can enter into contracts, hold property, and be sued in its own name. Like a partnership, an LLC is not taxed as a separate business entity. Instead, all of the profits and losses of the LLC “pass through” to the individual owners and are reported on their personal tax returns. LLCs are easy to form and maintain, and have fewer formalities than corporations. LLCs do not have to hold annual meetings or keep minutes, and unlike corporations, they may be managed by non-owners. LLCs can be formed by a single individual (although this is not recommended), and there are no restrictions on foreign ownership.
An LLC is a good choice for any business that wants the liability protection of a corporation without the formalities or double taxation.
LLCs are governed by an operating agreement, which outlines how the business will be run and how profits and losses will be distributed among members. The operating agreement can be customized to fit the specific needs of your business. You are not required to have an operating agreement to form an LLC in New York state or New York City (NYC), but it’s highly recommended that you do so.
To form an LLC in NY state or NYC, you must file articles of organization with the NY Department of State (NY DOS). The filing fee for articles of organization is $200 for online filings or $205 for paper filings. If you file by mail, you must also include two copies of your proposed certificate of incorporation with your filing fee payment. Once your articles have been filed and accepted by the NY DOS, your LLC will be officially formed.
If you are forming an LLC in NYC, you must also file a Certificate of Authority with the NYC Department of Consumer Affairs. The filing fee for a Certificate of Authority is $50.
If you are forming an LLC with more than one member, you will need to obtain an Employer Identification Number (EIN) from the IRS. You can apply for an EIN online, by fax, or by mail. There is no filing fee to obtain an EIN.
After your LLC has been formed, you will need to obtain any licenses or permits that may be required for your business. For example, if you are selling food products, you will need to obtain a license from the NY Department of Agriculture and Markets. If you are providing professional services such as accounting or legal services, you will need to obtain a professional license from the appropriate state licensing board.
You may also need to register your LLC with the NY Department of Taxation and Finance if it will be doing business in NY state and will be required to pay sales tax on the products or services it sells. To register your LLC with the NY Department of Taxation and Finance, complete Form IT-204-LL and submit it along with payment of the $25 filing fee.
If you will be hiring employees, you will need to obtain workers’ compensation and disability insurance. You may also be required to withhold state and federal taxes from your employees’ paychecks and to pay unemployment insurance taxes.
Here’s what you need to know about forming an LLC in New York.
1. Name Your LLC
The first step is to choose a name for your LLC. The name must include the phrase “limited liability company” or “LLC,” and it can’t be the same as another business name already in use in New York. You can check business names on the New York Department of State website to see if your desired name is available.
2. Appoint a Registered Agent
Every LLC must appoint a registered agent, who is responsible for accepting legal documents on behalf of the company. The registered agent can be an individual or another business entity, but they must have a physical address in New York and be available during normal business hours. Many businesses hire professional registered agent services to handle this responsibility.
3. File Articles of Organization
The next step is to file Articles of Organization with the New York Department of State. The Articles of Organization must include:
- The LLC’s name and address
- The name and address of the registered agent
- The LLC’s purpose
- Whether the LLC will be managed by members or managers
- The effective date of the Articles of Organization, if different from the filing date
4. Create an Operating Agreement
An operating agreement is not required in New York, but it’s a good idea to have one. The operating agreement outlines how the LLC will be managed and how decisions will be made. It can also help prevent disagreements among members later on. The operating agreement should include:
- The names of the LLC’s members
- How new members will be admitted
- How the LLC will be managed (by members or managers)
- The roles and responsibilities of members and managers
- How profits and losses will be distributed among members
5. Obtain an EIN
An Employer Identification Number (EIN) is a unique nine-digit number assigned by the IRS to businesses for tax purposes. You’ll need an EIN to open a business bank account and file taxes. You can apply for an EIN online, by fax, or by mail.
6. Comply With Other Tax and Regulatory Requirements
Depending on the type of business you run, you may need to obtain other licenses and permits. For example, if you sell alcohol or tobacco products, run a food business, or offer certain professional services, you’ll need to obtain a license from the New York State Liquor Authority. Check with your local government to see what other licenses and permits may be required for your business.
You’ll also need to pay state taxes, including sales tax and income tax. New York has a corporate income tax rate of 6.5%. The state also imposes an annual franchise tax on LLCs equal to $2 per $1,000 of capital employed in New York State (up to $10 million).
7. File an Annual Report
All LLCs in New York must file an annual report with the Department of State. The report is due by the last day of the LLC’s anniversary month and must include:
The LLC’s name and address
The name and address of the registered agent
The names and addresses of all members and managers, if applicable
The effective date of the Articles of Organization, if different from the filing date
New York Department of State: http://www.dos.ny.gov/corps/llc_article9.html
New York City Department of Consumer Affairs: http://www1.nyc.gov/site/dca/businesses/starting-a-business-in-nyc.page
New York Department of Taxation and Finance: http://www.tax.ny.gov/bus/llc/llchome.htm