NY Startup Law

A businesslaw blog for New York entrepreneurs by Marc Law Associates PLLC

4 NECESSARY STEPS TO STARTING AN LLC IN NEW YORK

As a business attorney, one of the most popular questions from clients is whether they should use the Limited Liability Company (“LLC”) format for their new business venture. Many people also come into my office thinking that they started a valid LLC years ago by filing something, somewhere (too numerous to men tion).  However,  upon closer inspection, the New York Department of State Division of Corporations (“DOS”) usually does not have any information on the business. Why? Because it was probably not filed properly, or if it was, it was not maintained properly.

This post will attempt to clear up the ambiguity and get you through the first steps of filing a valid LLC in New York.

ARTICLES OF ORGANIZATION

This is the first document that a company must submit to become recognized. After researching to see if your desired company name is still available, you must draft one of these or use the form on the DOS website (usually safer) with information like your company name, whether the LLC will be managed (alternative is to vote on all decisions), the address to serve your company, etc. After sending this along with a $200 filing fee, the DOS will return a filing receipt and the first step is done.

TAX ID

The IRS requires each business to have a tax ID number. These are similar to an individual’s social security number, just for your business. You can apply directly for one on the IRS website. https://sa1.www4.irs.gov/modiein/individual/index.jsp

PUBLICATION REQUIREMENT

After receiving the filing receipt from the DOS,  New York requires each LLC to publish a notice in two local newspapers in the county where the principal office of the company is located for a period of six weeks within the first four  months of your existence. You must get the two publications from the County Clerk’s office in the associated county.  This is an expensive step, especially if your office will be in Manhattan, since the required paper in New York county is the New York Law Journal, which has high advertising fees. Each paper will return an Affidavit of Publication, which you will file with the DOS along with a $50 fee. Failure to comply with the publication requirement will render your LLC invisible to the court system if it wants to sue anyone, but the court WILL recognize it if being sued. Needless to say, this is worth the extra money if you must file it in New York.

OPERATING AGREEMENT

The operating agreement will govern all of the day to day aspects of your LLC. This document should not be overlooked. Moreover, you should pay a professional to draft it. A good Operating Agreement will cover how the capital is to be allocated, voting rights, management of the company, choosing officers, dividend distribution, the allocation of shares in the event of death, dissolution, etc. For that reason, there should be a great deal of discussion and planning before executing one. The more members in the LLC, the more complex the agreement will be.

After obtaining the Tax ID, the LLC can start a bank account in its name. If there are any licenses required for your operation, please obtain them prior to opening for business. Please keep all company funds separate from personal bank accounts, and remember to file taxes every year. This will prevent anyone from alleging that you are a sham company created to avoid personal liability if sued (a whole other topic to be discussed in a future post) .

Also, remember to meet with your CPA, and business insurance agent if you have one to ensure that the tax structure you choose (with an LLC you can choose to be taxed as a corporation or partnership) fits your company goals, and that your company has sufficient insurance to weather any periods of unexpected hardship.

Thanks.

 

Patrick Marc, Esq. 

 

 

Share this article

Leave a Reply

Your email address will not be published. Required fields are marked *

Human Verification *