NY LLC: Everything You Need to Know
Establishing an NY LLC is a popular choice for business owners looking to set up a business in the state of New York.3 min read
Establishing an NY LLC is a popular choice for business owners looking to set up a business in the state of New York. An LLC is a hybrid entity that provides owners referred to as members the benefits of protecting their personal assets from being seized for business debts as well as the tax benefits that a partnership or corporation enjoys.
LLCs are often taxed the same as sole proprietorships in the fact that they function as pass-through tax entities meaning that taxes get paid at the member-level on their personal tax returns. Unlike S-Corporations, LLCs do not have any ownership restrictions and can have more than 100 members or as little as one. Owners of an LLC can consist of individuals, corporations, partnerships, non-resident aliens, trusts, pension plans, and even charitable organizations.
To become a member of an LLC, you will need to make a capital contribution which will be the member's interest or percentage of ownership in the company. A capital contribution is in the form of money, real estate, equipment, or sweat equity. Managers run the LLC's day-to-day business functions. They are either appointed by members or are the members themselves. Managing-members will often receive a salary for their daily work.
One benefit of Limited Liability companies in New York is that the LLC will be exempt from New York State franchise fees that other businesses pay. Another way in which LLCs are beneficial is in the liability protection that they provide their owners.
Owners should obtain the maximum protection allowed by New York law for full protection. This is done by including an indemnification provision in your Articles of Organization that protects the operating manager from any action taken against the LLC.
Steps for Forming an LLC in New York
Forming an LLC in New York is relatively easy and involves a few steps to ensure recognition in the state. To start your New York State LLC, you will need to:
Choose Your Business Name
One of the first and most important steps to starting your LLC is determining your company name. It is vital to choose a name that is easy for customers to search for as well as being properly suited for the type of business you are running. Doing some initial research when choosing your business name helps ensure you end up with a name you are happy with as well one that meets the regulations of the state. Some of the state requirements for choosing your LLC name include:
- Your name will need to include Limited Liability Company, LLC, Ltd. Liability Co., or LTD at the end of the name.
- You cannot use any restricted or prohibited words defined in section 204 of LLC law.
- You cannot use words that indicate there is a licensed member of your LLC if one does not exist, such as attorney, bank, or education.
- You cannot choose a name that associates it with a federal or state agency.
- It is completely distinguishable from any other name registered in the state.
It is important to wait to order items for your business that would bear your business name such as uniforms, menus, accounts, signage, business cards, websites, etc. until you receive a confirmation that your name is available. Once you have determined that your name is available, you can reserve the name for up to 60 days to give you time to form your LLC.
To reserve your name, you will need to send in an Application for Reservation if Name along with a $20 fee to the New York Department of State Division of Corporations. Some of the reasons it is essential to wait before using a yet to be approved name include:
- The risk of a lawsuit due to trademark infringement
- A loss of customers after having to change your name
- The cost of putting your company through the name change process
- Additional expenses for reprinting and creation of new items that bear your company name
Appoint Your Company's Registered Agent
Even though the New York Secretary of State will act as your companies registered agent by default, many companies hire their own registered agent due to the limited services that the Secretary of State provides. A registered agent accepts legal paperwork on behalf of the LLC.
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