New York LLC Regulations

by Anna Assad

A limited liability company, or LLC, in New York is regulated by the laws found throughout the Limited Liability Company Law section of the Laws of New York. An LLC is a hybrid of the legal aspects of a partnership and corporation. The members of an LLC are protected against personal liability for the business, but a formal corporation filing is not used.

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Formation

An LLC cannot be formed for an illegal purpose or to perform services another entity is required to perform under state law, per §201 of the Laws of New York. The name of the LLC must indicate the business is a limited liability company by using "LLC," "L.L.C." or the full title after the business name, and the name must be clearly distinguishable from other businesses legally operating in New York. The initial articles of organization have to be signed by at least one organizer and filed in the office of the Department of State, but subsequent filed certificates and amendments need the signature of only one member.

Designated Agent

The initial articles of organization for any LLC in New York must designate the Department of State as the agent for service of process, the entity that receives legal notices on the behalf of a business. The Department of State forwards a copy of any legal notices received to the current address listed for the LLC in the state file, per §301 of the Laws of New York.

Management

New York laws generally allow the articles of organization and bylaw rules to govern the management of the LLC, but some exceptions exist. Members who are entitled to a vote on a business matter but are not told of the meeting or the decision must give written consent to the decision and be promptly notified under §407 of the Laws of New York. Any member who causes the LLC loss or harm due to an act of bad faith or dishonesty is not legally shielded from claims due to her actions per §420 of the Laws of New York.

Contributions and Distributions

The contributions by and distributions to an LLC member are generally governed by the articles of organization under New York State law; however, no member may be forced to accept a distribution that exceeds his fair share of the proceeds from the LLC, per §505 of the Laws of the State of New York. Any member who takes a distribution that renders the company with no assets is liable for claims from creditors and other parties against the LLC as a result, provided he knew the share he received exceeded the LLC's worth under §508 of the Laws of the State of New York.

Dissolution

The triggers for a dissolution of an LLC are found in §701 of the Laws of the State of New York. An LLC is held as dissolved by New York State if the following occurs: a dissolution date in the articles of organization is reached; a dissolution event provided in the articles of organization occurs; a proper vote is held and the dissolution is approved; a judicial decree is issued; or no members are left. The members may distribute remaining assets as dictated by the bylaws of the LLC, but creditors are to be paid first.