Articles of Organization

Forming an LLC in New York requires filing of articles of organization with the Corporations Division of the New York Secretary of State's office; the filing fee starts at $200, and can be expedited for an additional fee. The articles of organization must be signed by at least two LLC organizers and include the LLC's name, its purpose, each organizer's name and address, the street address (including county) of the LLC's registered office, the name of the LLC's registered agent at that office, and a statement regarding whether the LLC will be run by a manager or member(s). If the LLC is scheduled to dissolve by a certain date or upon a certain event, the articles must also state the period of the LLC's duration. The articles may also include other provisions that the members decide on, as long as they are not inconsistent with state law.

Your LLC is "organized" once an original and a copy of the articles of organization are received by the New York Secretary of State's office with the appropriate filing fee. The articles must be executed by at least two organizers. The articles of organization are effective as of the date and time they are filed.

State law in New York requires that a notice about the LLC's formation is published in two newspapers designated by the county clerk where the LLC's office is. An affidavit of publication from each newspaper must be filed with the Department of State, along with a $50 filing fee.

Registered Agent and Office

New York LLC's must designate a registered agent in New York to receive official state correspondence. A LLC's registered agent can be a resident individual in New York State, a corporation, or a corporation originally formed in some other state that is authorized to transact business in the Empire State. It is allowable but not required for the registered office to be the LLC's place of business.

Operating Agreement

After to its articles of organization, an LLC's most important document is its operating agreement, which can be amended or repealed as laid out in the agreement or state law as applicable. In the same way as a corporation's bylaws, having an operating agreement isn't mandated by the state, but it's a very important internal document that officially states how the LLC will be run. It should list the LLC's members, how much each one has invested, how the profits will be divided, and how much weight each member has when matters come to a vote.

The operating agreement may also specify requirements for meetings and so on, but it is not required to. Normally, however, the operating agreement does include state requirements, and it can contain limits on the members' authority to adopt, change, or repeal an operating agreement. If the LLC has more than one member, the operating agreement must be initially approved by all the members in writing.

Members

The owners of an LLC are called "members" instead of "shareholders" or "partners" as in a corporation. An LLC must have at least one member, who may be an individual, a corporation, a partnership, another LLC, or any other legal entity. Members may acquire an interest in or become a member of the LLC when it is formed, in a method stated in the operating agreement, or when the majority of the LLC's members approve by voting.

A member normally needs to pay cash, make a contribution, or transfer property to the LLC in order to become a member. However, an individual may be admitted as a member without acquiring a membership interest if there is such a provision in the articles of organization or operating agreement, or if all the LLC's members consent and the admission is documented in the official records.

A member can only resign from the LLC in the manner stated in the articles of organization or operating agreement. These also usually specify a minimum period of time a member can be a member before being allowed to resign. LLCs have the option of pursuing legal compensation for damages to the LLC because of a member's resignation.

Ongoing Requirements

Every two years, LLCs must file a Biennial Statement with the New York Department of State stating the address to which the Secretary of State would mail a copy of any official correspondence or legal document.

Additionally, each New York LLC must keep the following records open to inspection at its office:

• An alphabetical list of the members and their mailing addresses
• Each member's contribution and share of profits and losses
• If member-managed, a list of the managers and their mailing addresses
• A copy of the articles of organization, along with any amendments
• Copies of federal, state, and local income tax returns for the last three years
• A copy of the written operating agreement with any amendments
• Copies of any powers of attorney used to execute a certificate or amendment

It's also a good idea for your LLC to keep handy minutes of board proceedings and member/owner committees.

Dissolution

An LLC is considered to be dissolved when any of the following events occur:

• Event(s) specified in the articles of organization or operating agreement that require dissolution
• A majority of the members or groups of members agree to dissolution
• An event that makes it illegal for the LLC to continue
• When all members leave the LLC, unless within 180 days the legal representative of the last remaining member agrees in writing to continue the LLC and to admit the legal representative as a member
• A judicial decree orders dissolution

Taxes

An LLC has some tax advantages compared to a corporation, including more potential tax deductions. Also, an LLC does not have to be a separate tax entity like a corporation; instead, it can be a "pass-through entity" when it comes to taxes, so that the LLC owners report business losses or profits on their personal tax returns, in the same way that a partnership does.

The IRS treats single-member LLCs as sole proprietorships for tax purposes. This means that the LLC itself does not pay taxes and does not have to file a tax return. The IRS treats multiple-owner LLCs as partnerships for tax purposes, unless you choose for your LLC to be taxed as a corporation. The result of this is that LLC owners each pay taxes on their lawful share of the profits on their personal income tax returns, rather than the LLC itself paying taxes.

The tax rate for New York LLCs varies, based on New York taxable net income.

Certificate of Formation

New York state law requires that a certificate of incorporation be filed with the New York Department of State; filing fees start at $135. The certificate of incorporation must also include information on the incorporators, directors, their eligibility requirements and addresses, the corporation's registered agent, the NY county where the corporation's office will be located, and the company's duration (if it's not meant to be perpetual).

It also must specify: the aggregate number of shares the corporation is authorized to issue; the par value of each share (or a statement that there is no par value); or, if applicable, the number of shares and par value of each class of shares and series along with their designations, a statement of their relative rights, preferences, and limitations. Additionally, the certificate should describe the authority vested in the board of directors to establish, designate, and make changes between series, if any.

Incorporators have the duty of signing and delivering the certificate of incorporation to the Department of State for filing, as well as adopting the corporation's bylaws.

The certificate of incorporation may state the corporation's business purpose, but it is not required to. The certificate of formation may also prescribe qualifications or prerequisites for organizers and directors, or those qualifications may be listed in the corporate bylaws.

State law also allows the certificate of formation to include language that formalizes additional requirements, such as rules for managing the business or otherwise regulating the corporation's procedures.

Registered Agent and Office

New York corporations must have a registered agent in New York who is designated to receive official state administrative and legal correspondence. The agent must have the same business office address as the registered office and be either an individual living in the state or a business entity authorized to conduct business in New York. The registered office has to be more than just a mailbox or an answering service, but it does not have to be an actual corporation place of business.

Bylaws

A corporation is required to keep a copy of its bylaws at its main executive office, but is not required to file them with the state. At its initial meeting, the board of directors should adopt corporate bylaws, and then keep them updated as time goes on. Bylaws describe the corporation's basic managerial and legal operating principles, including information on:

• Shareholders and directors meetings
• The authority, number, and tenure of directors
• Voting procedures
• The duties, responsibilities, and tenure of officers
• How stock is issued
• How and when annual financial information is provided to shareholders

Directors and Officers

The corporation's business is managed by its board of directors, each of whom must be at least 18. The board must consist of one or more members as specified by the bylaws or by action of the shareholders. Directors are generally elected at each annual shareholder meeting to hold office until the next annual meeting.

The board of directors elects officers-president, one or more vice presidents, treasurer, secretary, etc.-in accordance with the corporation's bylaws. An officer may hold more than one office in the corporation unless otherwise prohibited by law.

Officers may be appointed or elected by the board in compliance with the corporation's bylaws, or elected by shareholders in compliance with the certificate of incorporation. Any officer may hold more than one office in the corporation. One person may hold all or any combination of offices when all of the issued and outstanding stock of the corporation is owned by this same person. The board may require any officer to provide security for the faithful performance of his or her duties.

Required Reports

New York corporations must file a report with the NY Secretary of State during the calendar month in which the corporation's original certificate of incorporation was filed. This report must state the name and business address of its chief executive officer, the street address of the corporation's principal executive office, and the post office address in or out of the state to which the NY Secretary of State may mail a copy of any process served against it.

Taxes

The New York corporate income tax, sometimes referred to as a "franchise tax," is based on four separate calculations related to corporate income, payroll, and the value of subsidiary capital allocated to New York (New York net income is your entire federal net income with adjustments).

New York imposes a tax on domestic and foreign corporations for "exercising their corporate franchise"-for doing business, employing capital, owning or leasing property, or maintaining an office in New York State. If your corporation is organized for profit and carrying out any of the purposes of its organization, New York deems it to be "doing business" for purposes of the franchise tax. This is true for both "regular" C corporations as well as "S" corporations.

S Corporations

A "subchapter S" corporation or "S corp" is one that chooses to be treated as a pass-through entity for tax purposes in the same way as a sole proprietorship or partnership; tax-related information for the S corp is filed as part of the owner's individual income tax.