Starting an LLP in New York
Starting a limited liability partnership (LLP) in New York State requires an understanding of local laws and regulations3 min read
Starting a limited liability partnership (LLP) in New York State requires an understanding of local laws and regulations. An LLP has characteristics of both a corporation and a partnership. It combines the limited liability of a corporation with the tax structure, ease of formation and operational features of a partnership. As such, this form of business entity gives partners the opportunity to gain financial advantages and protection from personal liability without the administrative overhead of a corporation. With an LLP, personal assets are shielded from other partners’ liabilities and it allows partners to leave without dissolving the entire business.
Before taking the next step, it’s important to consider the advantages and drawbacks of forming an LLP. The major advantage is limited liability protection — similar to the protection of a corporation — allowing partners to maintain personal asset security. Since an LLP is taxed as a partnership, any profits or income are not subject to tax at the business level. Additionally, nothing is owned by the partnership — only the owners do — so the exit of any partners does not impact the entity. However, if partners don’t abide by the partnership agreement, personal liability may arise even with an LLP.
When it comes to understanding the regulations involved in forming an LLP in New York State, there are a few key items to consider:
Filing an LLP
The first step to forming an LLP is the filing of the Articles of Organization with the New York State Department of State. In addition, you must decide the name of the LLP, which can include the name of any member or manager and can contain words such as “limited liability partnership.”
The required filing fee is $200. For an additional cost of $50, the Department of State can provide a Certificate of Good Standing confirming the formation of the partnership and that all taxes and fees are up to date.
Operating Agreement
Before or after filing the Articles of Organization, you must also create a written operating agreement between the partners or members of the partnership. This agreement covers all aspects of the LLP's governance, including the management, capital contributions, percentages of ownership, distribution of profits, and admittance of additional partners. The operating agreement should be drafted and reviewed by experienced counsel to ensure that the agreement complies with local regulations and provides clear instructions for resolving issues within the partnership.
Maintenance
LLPs in New York State must make an Annual Filing Report with the Department of State. This report documented changes in the LLP such as changes in address, members, and managers. The filing fee is $9 fee. The Department of State will also send out Notice of Registration Sent by the Department of State. This form must be completed and returned to the Department.
Ongoing Legal Support
An LLP is a form of business distinct from a corporation or partnership, yet shares many of the same legal duties and requirements. Therefore, if you are interested in taking the steps to form an LLP in New York State, it is important to partner with experienced legal counsel who understand the specific regulations and requirements of local laws and regulations.
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