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Did You Know?
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Whether you’ve lived in Albany for your whole life or moved to New York City to make your fortune, all New York business owners can benefit from the personal liability shield created by forming an LLC.
Every LLC formed in New York needs to include “Limited Liability Company,” “L.L.C.,” or “LLC.” The name must also be distinguishable from every domestic or foreign business entity in New York, and cannot contain the words:
“Board of trade,” “chamber of commerce,” “state police,” “state trooper,” “community renewal,” “tenant relocation,” “urban development,” “urban relocation,” “corporation,” “incorporated,” or “partnership”
An “organizer,” who can be any person, forms an LLC by filing articles of organization with the Department of State and paying the $200 filing fee. The articles of organization must include: The LLC name, the county where its principal office is located, and the name and address of the registered agent (which can be the Secretary of State).
You can also include any additional provisions that you want to be part of public record, such as a pre-set date of dissolution or the purpose of the business.
New York is unique in that it has a publication requirement for new LLCs. Within 120 days of formation, the articles of organization must be published once a week for 6 consecutive weeks. This must be in both a daily and weekly newspaper in the county of the LLC’s principal office. Affidavits of publication must be filed with the Secretary of State.
New York LLCs must have a written operating agreement within 90 days of formation that sets out the management and membership relations and other internal affairs.
New York has one of the biggest markets in the country, and it is the leader in commercial contract law. The New York LLC statute gives LLC members contractual freedom to customize their allocation of profits and losses, form an LLC with unlimited life, and protect their membership interests from creditors.
New York Commercial Law Governs More Contracts than Any Other State’s Law
New York law governs over 45% of important contracts involving public companies. This makes New York the leader in commercial contract law. In addition, it means New York’s legal system has experience in commercial law. Over 41% of important contracts involving public companies that specify a forum for litigation chose New York.
New York Has One of the Largest Volumes of LLCs in Existence
Each year, New York forms approximately 50,000 new LLCs. New York has over 323,000 active LLCs.
New York is a Leader in Population and Economic Rankings
New York has one of the biggest markets in the United States in terms of population and wealth. New York is the third largest state by population. Its economy ranks third in the nation by gross domestic product. Its economy ranks third for job creation, and the U.S. Chamber of Commerce ranks its labor force fourth in economic output per job.
In addition, New York has benefited from the Marcellus Shale natural gas boom. Natural gas distribution is the fastest growing industry in terms of job creation in the state.
The New York LLC statute gives LLC members contractual freedom to customize their capital contributions and their shares of profits and losses. An LLC’s members can specify a method for allocating profits and losses in an LLC Agreement that is greater or lesser than their portion of capital contributions. This gives members contractual flexibility to tailor their income streams and risks of loss to further their big-picture asset management plans.
Duration
The New York LLC statute provides for an LLC’s unlimited life. The “death, retirement, resignation, expulsion, bankruptcy or dissolution of any member” does not cause an LLC to dissolve unless the operating agreement provides otherwise. An LLC’s existence is therefore not restricted to its members’ lifetimes.
Formation
The New York LLC statute does not require filing of members’ names. A “person” may organize an LLC, and the person does not need to be a member of the LLC. The definition of “person” includes almost any kind of business or legal entity. An LLC’s members may therefore have an entity or person who is not a member file the LLC’s Articles of Organization with the New York Secretary of State.
Creditors Only Get Passive Rights, Not Control Rights
The New York LLC statute protects membership interests from members’ creditors. An LLC member’s judgment creditors have only the rights of assignees. The member’s creditors are only entitled “to receive, to the extent assigned, the distributions and allocations of profits and losses to which the assignor would be entitled.” They are not entitled “to participate in the management and affairs of the limited liability company or to become or to exercise any rights or powers of a member.” This enables members to keep others from unexpectedly joining the LLC as members.
The New York LLC Publication Requirement
The most unusual part of the New York LLC statute is its publication requirement. An LLC must publish a notice of its formation once a week for six successive weeks in two newspapers in the county where the LLC’s office is located. If an LLC does not satisfy the publication requirement, its authority to conduct business will be suspended. This applies to domestic (NY) LLCs and foreign (out of state) LLCs that apply for authority to do business in New York. Applying for authority is also called “qualifying” to do business in New York.
Failing to qualify a foreign LLC on time has a very small penalty and costs only slightly above what it would have cost the foreign LLC had it qualified when it started doing business in New York. A foreign LLC may defend itself in a New York court if it has not qualified in New York, but it may not be a plaintiff in a New York court until it has qualified. A plaintiff in a New York court may serve process upon a foreign LLC that has not qualified in New York by paying a fee and serving the New York Secretary of State. During the lawsuit, the court may order the foreign LLC to reimburse this fee. The fee is only $40.
The other unusual aspect of New York is that it does not require a registered agent to be a private entity. Many New York LLCs name the New York Secretary of State as the company’s only registered agent. A foreign LLC cannot qualify to do business in New York unless it designates the New York Secretary of State as a registered agent. Naming an additional registered agent is optional.
New York also has a very active and debtor friendly federal bankruptcy court, and a company can file for a Chapter 11 Reorganization either where headquartered or formed. Therefore, being formed in New York gives you access to New York’s federal bankruptcy courts to protect your business from creditors, should the business go “over the falls.”
Because of the advantages of forming an LLC in New York, approximately 50,000 new LLCs are formed in the state each year. Should you wish to have more flexibility and protection, you may instead form a Delaware LLC even if you operate in New York. What are the advantages of a Delaware LLC? (Delaware LLC Advantages). We can then help you file an application for registration to do business in New York with your Delaware LLC (Form Delaware LLC).