Forming a LLC in New York State

 

MURRAY LLP 

JULY 2012
FORMING AN LIMITED LIABILITY COMPANY (LLC) IN NEW YORK
In New York one of the most common forms of entity for operating a business is a Limited Liability Company (commonly known as an LLC).  Depending on the circumstances it may be an appropriate entity to choose when establishing a business or other undertaking in New York State.  An LLC is often known as a hybrid.  It combines the limited liability advantages of a company with the operational advantages of a partnership.  For example, whereas a company the management (directors) are separate from the owners (shareholders), in an LLC the roles are fused with the owners being “members”.   For tax purposes it is ordinarily treated as a partnership, although it may elect to be treated as a corporation.   There are no restrictions on who may be the members, and therefore it can be an individual, corporation or even another LLC.     The LLC’s name must include the words “Limited Liability Company”, “LLC” or “L.L.C”.
In order to establish an LLC Articles of Organization are filed with the NYS Department of State (“DOS”).  In addition, a written Operating Agreement is required.  The Operating Agreement sets out the basis for the operation and governance of the LLC.  The Operating Agreement is not filed with the DOS and remains a private document.  Murray LLP can undertake all aspects of filing the Articles of Organization and preparation of the Operating Agreement.
One aspect of forming an LLC that is sometimes overlooked is the requirement to publish a notice in two newspapers in the County where the LLC is located for a period of six consecutive weeks.  The County Clerk for the relevant County advises on the acceptable newspapers for making the publications.  There is a prescribed form which the notices must meet and the publisher of the newspaper will provide affidavits of publication which must be filed with the DOS.  If the LLC fails to carry out the publications or does not follow the prescribed form then its authority to carry on business in New York will be suspended.
The filing fee for the formation of the LLC to the DOS is $200 ($225 for express filing).  In addition, upon completion of the publication requirements the affidavits of publication must be submitted to the DOS with a $50 fee.
In New York as in most other states it is possible for one person to be the sole member of a LLC.  A single member LLC for federal tax purposes is treated as a disregarded entity. This means that absent any other election a taxpayer will require to include the income and expenses from the LLC on their own tax return. As soon as any additional member is admitted the LLC will be treated as a partnership for federal tax purposes. In addition to the tax considerations there is an argument that a single member LLC may not offer the level of asset protection compared to a multi member LLC.  Owners of a single member LLC should take care to make sure that contracts are executed in the name of LLC, as is the general position.

There are other considerations when forming an LLC and this document does not serve as tax and/or legal advice.  If you would like to receive legal advice on establishing a LLC in New York please contact us:

Anthony Murray
Murray LLP
(212) 729 3045
anthony@murrayllp.com

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