99% of businesses in New York are small businesses and they employ nearly half of all employees in the state. Small businesses are an integral part of New York’s economy.
If you are contemplating starting your own business, you may be wondering about the process and which business entity is appropriate for you. Forming an LLC is straightforward, inexpensive, and quick. If you’re ready to enter the small business world, read on for more information on the process as well as a New York LLC operating agreement template.
Is an LLC Operating Agreement Required in New York?
An operating agreement is required in the state of New York. Although neighboring states, like New Jersey and Pennsylvania, do not require them, New York does.
Why Should You Have an LLC Operating Agreement in New York?
There are a few reasons why you need an LLC Operating in New York, including:
- It’s required by law – The most obvious reason for having an LLC operating agreement for your New York business is that it’s required by the state. The law states that the members of a limited liability company shall adopt a written operating agreement within 90 days after the filing of the articles of organization. The state law doesn’t specify any punishments or penalties for not having an operating agreement for your limited liability company, but it’s highly beneficial to have one—you should also comply with the law.
- Protects members from personal liability – Having an operating agreement for your limited liability company helps to prove that the LLC is a separate legal entity, therefore protecting members from personal liability. It also prevents your company from being mistaken as a sole proprietorship or partnership when it comes to tax and lawful purposes.
- Helps avoid and overcome any conflicts – Having a New York LLC operating agreement outlines what to do if there are any conflicts or disputes between members about operations and finances. It clearly outlines processes and procedures, and the responsibilities and expectations of each member.
- Required by institutions and lenders – More often than not, you will require an LLC operating agreement to apply for loans and other types of funding, as well as open a business bank account.
New York Operating Agreement Laws
New York state laws require LLC members to create an operating agreement and enter into it within 90 days of filing the articles. You can find the operating agreement laws in § 417.
How Much Does It Cost to Form an LLC in New York?
It will cost you $200 to form an LLC in New York. You also are required to file a biennial report, which is due every two years and costs $9 to file. The foreign filing fee is $250.
Additionally, state laws require that within 120 days of formation, LLCs must publish a copy of their articles of organization or a notice that the LLC was formed in two different newspapers. One must be a daily newspaper and one a weekly newspaper.
You will need to pay a fee for the publishing, which is paid to the newspaper; it varies based on location and what paper you publish it in. Once you publish the notice, you will need to submit a Certificate of Publication to the New York Department of State and pay a $50 filing fee.
How to Form an LLC in New York
Once you’re ready to start your LLC, the process is rather simple. Use our easy-to-follow checklist below to get started:
Step 1 – Choose Your Name
You can choose your name as long as it follows New York’s rules. The name must be unique. It cannot be the same name as an existing business or too close to it. Use the online search tool to see if the name is available.
The name also needs to include the following: Limited Liability Company, LLC, or L.L.C. The name also can’t contain words used to name government agencies and if you use words like bank, credit union, attorney, etc., you must have the appropriate license. Check out this list of restricted words and phrases in New York to make sure your name complies.
You may also reserve your name for up to 60 days by completing the Application of Reservation of Name form and submitting a $20 filing fee to the New York Department of State.
Step 2 – Appoint a Registered Agent
The New York Department of State acts as the registered agent for all LLCs in the state. If you are sued, they will receive the papers serving you and then forward the documents to you.
You can choose to appoint a registered agent as well. This can be yourself, another employee of your LLC, or a registered agent service.
If you use an individual as your registered agent or a registered agent service, they must have a physical address in the state of New York. Your registered agent must be available to receive legal mail during business hours.
Step 3 – File Your Articles of Organization
The articles of organization is the most important part of creating your LLC. This document is filed with the New York State Division of Corporations and lays out pertinent information about your LLC. You can fill this out online or send it via mail.
The articles of organization should include the following information:
- The name of your LLC
- The New York county where the LLC will be located
- An address in New York where the Secretary of State can mail legal documents for the LLC
- The name and signature of the LLC’s organizer
- The name, address, and signature of the person forming the LLC
The secretary of state will review your articles and if they are approved, your LLC will become a legal business.
Step 4 – Publish Your Articles of Organization
As described above, you must publish your articles of organization in two newspapers. This must be done within 120 days after the articles of organization become effective.
The county clerk in the county where the LLC is located will designate the newspapers where you should publish them. Once they are published, an affidavit of publication and a certificate of publication must be submitted to the New York Department of State.
Step 5 – Create an LLC Operating Agreement
Within 90 days of filing your articles of organization, you must complete an operating agreement. Although you do not have to file this with the state, you still must adopt one.
When you have an operating agreement in place, the courts will make decisions based on what is best for your LLC and its members. Otherwise, the courts will make decisions based on state laws.
The operating agreement should include the following:
- The name and address of the LLC
- The duration of the LLC
- Dissolution procedures
- The purpose of the LLC
- Each member and their contribution
- Voting rights of the members
- How the LLC is divided among the members (e.g., profits, debts, etc.)
- Management of the LLC
Step 6 – Get an EIN
The IRS issues employer identification numbers (EINs). You can apply for these online. You’ll need the EIN if you are going to hire employees, open a business bank account, and to file taxes.
New York LLC Operating Agreement Template
If putting all of this information together seems overwhelming, we can help with a New York LLC operating agreement template. Use the form below to create your operating agreement: