Whether you clear now in Syracuse, sell bagels in Brooklyn, or start an ecommerce business in Albany, one of the most important decisions you can make as a business owner is how to set up your business. An LLC is a popular type of business entity that can provide numerous benefits. Here’s a step-by-step guide to start an LLC in New York.
Why Start an LLC in New York
If you are starting a business in New York state or New York City, you may want to consider forming an LLC. An LLC is an unincorporated business organization that offers limited liability for the business.
An LLC can offer a number of advantages for entrepreneurs. It can reduce personal liability and help to protect your personal finances from the activities of your business, as long it is properly maintained. It can look more professional to customers, helping you attract more business. An LLC can also help your business get financing as it grows, as some lenders will not lend to sole proprietors.
Note: Even if you live or do business in New York, you may determine it’s better to form your LLC in another state and then register that business as a foreign LLC in New York.
14 Steps to Starting a New York LLC
If you want to build a business in New York and have chosen an LLC as your business structure, here are the initial steps you’ll want to take:
1. Name Your LLC
Choosing the right name of your business is important. In New York, the LLC name must include the abbreviations “LLC,” or “L.L.C.” or the words “Limited Liability Company” in the name.
You’ll need to do a search to see if there are already businesses with similar names operating in New York. Then you must submit an application of name availability which will be reviewed— and hopefully approved— by the New York Department of State. (Note if you are having trouble with the name search you can contact the NYS Department of State, Division of Corporations at (518) 473-2492, Monday – Friday, 8:45AM – 4:30PM Eastern Standard Time.)
There are certain words and phrases that are either restricted or that cannot be used in the business name of an LLC in New York. For example, the use of the words “doctor” or “lawyer” in the name of the LLC is restricted to certain use cases.
You can also file a fictitious business name (also called an “assumed name,” “doing business as” or “DBA”) if you want to publicly use another business name.
2. Get a Registered Agent
A registered agent receives legal notices on behalf of the LLC. In NY, the LLC must designate the Secretary of State as its agent for service of process. But you’ll also have to provide a forwarding name address for any legal papers that are served on the LLC. A New York registered agent can serve in this role if you choose. Choosing a reliable registered agent service can help ensure your business gets timely notice of any legal matters so it can respond promptly.
3. File the Articles of Organization
You must file Articles of Organization with the state and pay the filing fee of $200. The articles of organization must include the name of the LLC, the county in New York in which the office will be located, the address where legal papers will be forwarded (which can be the registered agent’s address if you choose), the signature of the organizer and the name and address of the filer.
4. Create an Operating Agreement
Within 90 days of filing the Articles of Organization you must adopt an LLC Operating Agreement. This document establishes the rights, powers, duties, liabilities and obligations of the members (of the LLC) between themselves and the LLC.
There is no official New York LLC operating agreement; instead you’ll want to use one that is appropriate for your business needs. If you use an LLC Formation Service or work with a business formation attorney they will provide you with a written operating agreement. Note that you do not file your written LLC operating agreement with the Department of State, but you will want to keep a copy for your records.
5. Publish the LLC Formation
You’ll also have to meet New York LLC publication requirements. Within 120 after the articles of incorporation become effective, New York Law requires that a notice of the formation of the LLCs be published in two newspapers for six consecutive weeks. (The newspapers will be identified by the county clerk in the county where the LLC is located.) There is a filing fee for the Certificate of Publication of $50.
6. Get an EIN or Employer Identification Number
The taxpayer identification number for the LLC will be an Employer Identification Number (EIN) and you can get a free EIN from the IRS. (It serves a similar function for your business as your Social Security number does when you file your personal taxes.)
7. Get Business Licenses
Your business may require any combination of state licenses and/or local business licenses, as well as occupational licenses or professional licenses. You can find information about business licenses required in New York at the state website BusinessExpress.ny.gov. Another good resource for helping you understand how to successfully launch your business in New York is your local Small Business Development Center which provides free and low-cost business advising.
8. Learn About New York Tax and IRS Tax Requirements
Nothing can shut down a business faster than failing to pay taxes. Neither state nor the federal government are very lenient when it comes to tax obligations. That’s why it is crucial to understand and comply with tax requirements from the very beginning. For example, before your business starts doing business in NY, you’ll want to check out the New York Department of Taxation and Finance website for information on business tax requirements. Your business may have to pay state taxes, local taxes and/or sales tax.
Of course you’ll have to navigate federal income taxes as well. On the federal level, the Internal Revenue Service has a very helpful and thorough guide to tax topics online in the IRS Small Business And Self-Employed Tax Center. Your LLC can choose to be taxed as an S corp which may provide additional tax savings.
9. Add Biennial Filing Date to Your Calendar
In most states, LLCs must file annual reports with the state and pay an annual filing fee, but in the case of New York, you get a bit of a break. Only a biennial statement is required every two years. When you file, you will confirm or update information about your LLC with the state. The state fee for this filing is just $9 and you can file online.
10. Select The Right Insurance For Your New York Business
You’ll want to make sure you have the right insurance for your business, which may include general liability insurance, errors and omissions insurance, commercial auto insurance or other types. You may also want life insurance to help with business continuity if something unexpected happens to you. In some cases insurance may be required, in other cases it’s optional, but in most cases it can bring additional peace of mind and protection.
11. Get a Business Checking Account
An LLC should have a separate business bank account. Commingling business and personal accounts may put your personal assets at risk if your business is sued. It’s easy to open a business checking account even for a new business, and there are multiple options for no-fee business checking with low or no minimum balance required.
12. Build Credit For Your New LLC
Building business credit for your LLC can help as your business grows and needs financing. It’s not hard to build business credit, but it does require you to do business with companies that report payment history to business credit agencies.
13. Choose An Accounting System
The sooner you set up your accounting and bookkeeping system, the better. It’s always harder to play catch up. You’ll likely want to use accounting software to track your business income and expenses, and you may want to hire a bookkeeper or accountant to help make sure you meet tax requirements.
14. Decide On How You’ll Prepare For And Finance Business Growth
In the early days of your business, you may just be focused on trying to bring in revenue. But if you can spend some time planning you will be in a better position to take advantage of opportunities that come your way. A new business may need to initially use small business credit cards for financing.
But as your business grows, you’ll want to consider a small business line of credit or small business loans, depending on your business needs. By taking the steps in this article, you’ve already helped your business position itself to qualify for better financing.
Do You Need To Have A Business Plan Before Starting An LLC?
You don’t need a business plan to start an LLC. But it’s a good idea to develop one, even if it’s fairly simple. Fortunately there are numerous resources available to help you create a business plan, whether you want to make a simple or sophisticated one. For example, you can get a free business plan template from SCORE.
Should You Secure Trademarks, Copyrights And Patents Before Starting An LLC In New York?
While not mandatory, it’s a good idea to explore ways to protect the intellectual property of your business, including trademarks, copyrights and patents. While some businesses choose to secure those protections at the state level, often securing them on the federal level makes sense. That’s especially true today with many businesses reaching customers in multiple states.