Why Should a Start-up Business Become an LLC in NYC?


Starting a business is challenging in many ways. Whether handling small yet essential details or developing the big picture for a business plan, there are numerous tasks before getting underway.

Planning and developing a limited liability company, or LLC, is one of the more critical aspects of opening a business. This legal procedure can take time to organize but will offer valuable rewards and protection for you and your business. Let’s learn why it’s wise to open an LLC in NY when launching a start-up.

What is an LLC?

When considering a small business start-up in New York, it’s wise to form an LLC. A limited liability business structure separates the owners’ personal assets from their business interests.

For instance, if a company has legal issues and is being sued, the LLC protects the owner(s) from being impacted or their assets being threatened. This separation can be critical to keeping small businesses viable in NY and around the country.

What Are the Requirements for an LLC in NYC?

Forming an LLC may take a little work on the front end, but it will take care of itself once in place. The legal filings won’t take too long and will help to finalize the opening of the new business.

1. Decide On a Memorable Name

First and foremost, select a unique name for your company. You don’t want to be confused with another business, and you don’t want any legal hassles over copyright infringement or trademarked names.

You can search the NY Division of Corporation’s database to ensure your idea isn’t already taken. Also, remember that the name must include “LLC” in the title, most often as a suffix to the primary business name. (Ex. Green Thumb Lumber, LLC)

2. Articles of the Organization are Finalized and Signed

This document is a formal proposal for the LLC to be recognized by the state. It lists the person or persons forming the LLC, its official name, the physical address of the filing member, as well as other contact information like a phone number or email address. There is a $200 filing fee in NY.

One benefit of starting an LLC in NY: A New York Registered Agent for service of process is not required as the Secretary of State handles this duty. An LLC can also appoint a person to serve in this position.

3. Articles of the Organization are Filed with the State

The paperwork can be submitted for review via mail, online, or in person at the Division of Corporations in Albany. You’ll also need to purchase a certificate of existence for the LLC, which further proves the company’s organizational status.

4. A Business Operating Agreement is Created

Within 90 days of filing for the LLC, all company members need to formally agree upon the liabilities, obligations, rights, powers, duties, and any other parameters or designations for all company members.

In essence, the business structure is clearly defined and gives each member a clear understanding of their status and responsibilities. Each member should have a finalized copy of the agreement.

5. Publication Requirements Are Met

In many states, including New York, a new LLC must announce its opening in public newspapers. Considered a publication of the intent to do business, NY requires a new LLC to publish notice of its formation in two newspapers distributed in the county of the business’s registered office. Additionally, the notices must run for six consecutive weeks.

6. An Employer Identification Number is Issued

An EIN is required for the LLC if there’s more than one member. The IRS is responsible for distributing the numbers, and you can find out how to apply for one here.

Why Choose to Open an LLC in NY if You Have a Start-up?

There are many reasons to form an LLC for a startup, whether two partners or an office of 30. New York has offered a simple process to encourage small business formation and growth.

Easy Set Up

As we detailed earlier, each LLC must follow a similar process before officially becoming registered. Once these steps are complete and paperwork submitted to the state, the LLC requires little more than to stay in good standing as a business.

Opening up a business bank account during the setup process helps establish a financial starting point for the business and assists the company in using its EIN, if applicable. Most banks will be able to set up an account in less than an hour, too.

Pass-Through Tax

For most corporate tax structuring, the business and the individual shareholders are taxed on their earnings. This can be a difficult financial situation for a small business that has incorporated.

With an LLC, though, the tax burden passes through the business and is only paid by the individual or named partners of the company. Since a small business is usually the primary business and source of income for the proprietors, it’s deemed unnecessary to double-tax an LLC.

Personal Protection

One of the biggest reasons for forming an LLC is the ability to separate the individual from the business entity. Maintaining a dividing line between business and personal assets is essential for the LLC and the individual or partners.

As a small business, it’s possible to encounter financial or legal battles in which the company finds itself on the losing end. With an LLC, the business can be sued or asked to pay for damages or repairs, but the personal assets of the business owner(s) can’t be impacted. This way, if the business fails, the owners aren’t left entirely destitute and at the mercy of the state.

Business Identity

Another reason to open an LLC in NY is to help legally establish a business name, reputation, and brand. By developing an LLC, businesses can trademark their names and proprietary goods and open lines of credit through the company.

An LLC also lets potential investors know that the business is legitimate and worth supporting. Especially in a city with so much competition, developing a robust business model and organizational structure is necessary to stand apart as a startup. Opening an LLC helps to define a business’ professional approach and demeanor.

Fewer Rules and Regulations

As opposed to a corporate business entity, an LLC has fewer restrictions on the number of partners or members. This kind of flexibility allows for more effortless profit-sharing measures.

LLCs aren’t required to draft a Board of Directors, keep minutes of meetings, or assign Corporate Officer roles. Corporate rules and regulations can benefit more giant corporations but may seem stifling to a small business. The relaxed nature of an LLC is more conducive to a small business just getting its feet wet.

Professional Business Services

Developing an LLC is a monumental step for many small businesses, as it signals the beginning of a serious endeavor with defined intentions. But handling the paperwork and filings can be confusing at times.

Fortunately, the professionals at Windsor Law are experts at forming LLCs, deciphering corporate paperwork and tax structuring, or offering consultant services for businesses throughout New York and the surrounding areas.

Give us a call at 518-475-9285 or contact us through our website for more information about the services we can provide.

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