This post serves to provide a guide to those who want to form a New York LLC without a lawyer, accountant or online document preparation company. While getting the appropriate legal support from a lawyer is always recommended, many people have a misconception that you need to have a lawyer, accountant or online company help you form an LLC.
Online companies essentially charge a few hundred dollars to help you fill out a form with your own input, plus a few hundred more for filing fees. Lawyers charge somewhat more, but are able to give legal advice and craft your LLC documents to your specific needs. However, cash is often tight for an entrepreneur embarking on a new enterprise, and some choose to go with an online company to save on cost. We understand and want to provide you the basic tools to form an LLC as cheaply as possible — by doing it yourself!
The fees listed in this post are the amounts charged by the New York Department of State on 29 February 2016. Please check the New York Department of State, Division of Corporation’s website for the most recent fee schedule.
The following steps are required to form a New York LLC:
- Choosing a Name,
- Filing Articles of Organization,
- Publishing Notice of Formation,
- Filing Certificate of Publication, and
- Execution of Operating Agreement.
Choosing a Name for your NY LLC
Before creating a New York LLC, you need to decide on a name for your company. The name needs to contain the words “Limited Liability Company,” or the abbreviations “LLC” or “L.L.C.” It also needs to be distinctive enough to differentiate it from other Companies formed or registered in New York.
There are a few words and phrases that cannot be used, including “corporation,” “partnership,” “chamber of commerce,” and “state police.” To use words such as “bank,” “exchange,” “blind” or “institute,” or similar or related words, the respective permissions of the superintendent of financial services, attorney general, department of social services, or the commissioner of education must be obtained. Section 204 of the New York Limited Liability Company Law contains a full list of prohibited and restricted terms.
Once you’ve decided on a name, you will need to check to see if the name has already been used. The quickest way to do so is to use New York’s Corporation and Business Entity Database. But be aware that it is not updated every day. The Department of State charges $5 for a current name search, but running one is usually not practical.
If there is a concern that the name you want will be taken before the Articles of Organization is filed, you can request the Department of State to reserve the name for 60 days for $20 by filing an Application for Reservation of Name.
Cost: $0, $20 with reservation of name.
Filing the Articles of Organization
Once you’ve decided on a name, the next step is to prepare and file the Articles of Organization for your LLC. When it comes to forming an LLC, I’m a traditionalist and like to do things by paper. However, you can prepare and file the Articles of Organization using the New York Department of State’s online form. The directions below are for paper filers like me.
A free Articles of Organization form is available on the firm’s resources page. Direct links are also provided for your convenience: pdf docx. The New York Department of State’s website also provides a free form.
Be aware that the forms on the websites of the firm and the Department of State do not contain all the optional provisions that are available. I’ll touch on a few (not all) of the optional provisions available below.
One of the most important optional provisions concerns who the managers of the LLC will be: members or managers (managers are similar to directors of a corporation). This is a provision that must be specified in the Articles of Organization (and not the Operating Agreement). If management by managers is not specified in the Operating Agreement, under the default provision of New York law, members will manage the LLC.
A registered agent is not required in New York, since in New York the Secretary of State is designated as agent for service of process. However, if having a registered agent is desirable, the name and address of the registered agent should be specified in the Articles of Organization.
The Articles of Organization is essentially your LLC’s birth certificate, and your LLC will be formed on the date the Articles of Organization is filed. However, some people like to provide a different formation date (which must be within 60 days of filing) for legal reasons (such as contract) or cultural reasons (such as superstition). I grew up in an Asian community, and while a lawyer, I’m still very much attuned to practices such as choosing an “auspicious date” for the birth of a company.
The Articles of Organization needs to be submitted with a cover sheet (included in the forms above) which basically lets the Department of State know who to send the filing receipt to. When complete, mail the Articles of Organization and cover sheet, along with a $200 check made payable to the “Department of State” to Department of State, Division of Corporations, One Commerce Plaza, 99 Washington Avenue, Albany, NY 12231.
It normally takes about one to two weeks for the Articles of Organization to be filed. If you would like to expedite the process, you can send an expedite request along with the Articles of Organization to be filed. It costs an additional $25 for processing within 24 hours, $75 for same day processing, and $150 for processing within 2 hours. We normally use 24 hour filing, unless clients request otherwise. To request expedited filing, you send a separate check for the expedite fee (which is non-refundable) and a cover letter requesting that the process be expedited, along with the Articles of Organization to be filed.
It is also usually a good idea to request certified copies of the Articles of Organization for the LLC’s files and other matters (e.g., for opening a bank account). The fee for a certified copy is $10. You can request certified copies by sending the fee and a cover letter requesting a certified copy, with the Articles of Organization to be filed.
Cost: $220 with two certified copies; $245 if 24 hour expedited processing is included.
Publishing Notice of Formation
Under the New York Limited Liability Company Law, within 120 days of the date your Articles of Organization becomes effective (usually the date of filing), a notice of its formation must be published in one daily, and one weekly, newspaper of the county where the office of your LLC is located (as noted in the Articles of Organization). This is a relic from the good old days when everyone actually read newspapers in and the purpose of publication was to announce to the world to put people “on notice” that a partnership had been formed (similar to the traditional purpose of wedding announcements).
You cannot choose any newspaper you want; rather, the newspapers need to be designated by the clerk of the relevant county. Each county has its own process for designating newspapers. For most counties, you can call the county clerk’s office, say you have formed an LLC, and ask for two publications to be designated. The New York State’s Unified Court System has a handy Court Locator that can be used to find the appropriate telephone number.
Next, contact the two publications, check how much they charge, and send them your Notice of Formation (you can use the New York Law Journal’s “Create a Domestic Public Notice” tool to help prepare one).
Publication costs vary very widely. In New York county, publication can cost around $1,500, while in Albany county, it can cost as little as $150. The majority of online document preparation companies do not handle publication for you; so this is something you might need to do yourself.
Filing Certificate of Publication
After the newspapers have published the notices, and you’ve paid, they will send you Affidavits of Publication, which need to be annexed to a Certificate of Publication. The New York Department of State has provided a form Certificate of Publication on its website.
The Certificate of Publication, along with a cover sheet (included in the form above) and a $50 check made payable to the “Department of State,” need to be mailed to Department of State, Division of Corporations, One Commerce Plaza, 99 Washington Avenue, Albany, NY 12231.
Execution of Operating Agreement
New York requires LLCs to adopt a written Operating Agreement. The Operating Agreement governs an LLC’s internal affairs and how it will be operated. Since it is a legally binding document and can therefore affect your rights and obligations to the LLC, its members, and even third parties, it is important that the Operating Agreement is properly tailored to your business, and that you understand what you are getting yourself into. Thus, we strongly suggest speaking to a lawyer who can help you craft one..
Instead of having a custom crafted Operating Agreement, many people choose to rely on forms that are available online or in books, or that have been automatically filled by online business entity formation companies based on your input. Some forms are good, some are bad, and rarely do any fit all of the specific needs of your business. This makes it all the more important that you understand the approach in the form you may have decided to use.
The form above contemplates a relatively basic approach for LLC operations; however, it does not address issues such taxation of phantom income, deadlock, classes of members, and alternate dispute resolution, amongst others. We feel that such issues should be properly discussed before being reflected in the Operating Agreement as they could result in more harm than good. For example, one reason for forming an LLC could be asset protection. One asset protection strategy is to withhold distributions from the LLC so people you don’t want getting money from the LLC can’t get it. By providing distributions to cover phantom income taxation, it creates the risk that cash from such distributions will go to such personae non gratae.
Given the above, and although we believe that the form is likely more thorough than those prepared online, we make no guarantees that it is right for you or your business (if you choose to use it, we also suggest that you at least speak with a lawyer who can help you understand the finer points in the form). As a general rule, the more members, managers and other people involved in an LLC, the more important having a properly custom crafted LLC Operating Agreement becomes.
Cost: $0 if using form
This blog post is provided for general informational purposes only. It is not legal advice, and should not be a substitute for legal advice. If you have questions or comments about the post, or would like to learn more about something in the post, please feel free to contact me.