Rules Governing a New York LLC

By Tom Speranza, J.D.

Rules Governing a New York LLC

By Tom Speranza, J.D.

A limited liability company (LLC) is a business entity that combines the liability protection of a corporation with the flexible structure of a partnership. It can form in any of the 50 states, including New York.

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The New York Limited Liability Company Law governs these New York entities and sets out the rules for forming, funding, managing, and closing your business. The following are some of the major legal requirements for a New York LLC.

Articles of Organization and Operating Agreement

To form a New York LLC, you must file articles of organization with the Department of State and pay the required filing fee. As a general rule, articles of organization are relatively simple documents requiring only a few pieces of basic information about the new company, including its name, the county where the main office is located, the name of its registered agent, and how it will be managed. The Department of State's website also contains procedures for reserving a business name (up to 60 days prior to forming it) and complying with the legal requirement to publish an official notice of your new company in two newspapers.

New York requires all LLCs to have a written operating agreement signed by its members that details the business operations, responsibilities of all those involved, and processes for certain situations (death of a member, termination, bankruptcy, etc.). The members must draft, agree to, and sign an operating agreement no later than 90 days after forming it.

Management of an LLC

New York presumes that members will manage the company unless the articles of organization and operating agreement provide for managers. In a member-managed LLC, members make decisions by voting based upon their percentage entitlement to the business profits—with more than 50 percent of the profit shares needed to make a decision.

Certain major decisions listed in Section 402 of the New York Limited Liability Company Law require the vote of members holding a majority of the ownership percentages (more than 50%). If the operating agreement provides for different voting and approval procedures and thresholds, those rules supersede the default voting rules in the LLC law.

Subject to any contrary provisions in the operating agreement, members must convene for at least one meeting per year. If the company has managers, the members must elect them annually. If the business has more than one manager, they make management decisions by majority vote.

Finances and Membership Interests

An LLC's profits, losses, and distributions are divided among the members in accordance with the operating agreement. If the operating agreement doesn't cover those issues, the company allocates them in proportion to the members' capital contributions (calculated as those made or promised to be made). If a member fails to make a required capital contribution, the amount of the defaulted contribution is not credited to the member when figuring out how to divide profits, losses, and distributions.

Unless the operating agreement provides otherwise, a member's assignment of their membership interest doesn't make the assignee a member. The assignee acquires no voting or management rights and is only entitled to the assignor's portion of the business profits, losses, and distributions.

Dissolution of the Business

To dissolve, the company must wind up and liquidate their business in accordance with the applicable laws and file articles of dissolution with the Department of State. New York LLCs can end their existence in any one of the following circumstances:

  • On the termination date provided in the articles of organization (if any)
  • When a dissolution triggering event described in the operating agreement occurs
  • At any time if the members holding a majority of the ownership interests vote to dissolve
  • Upon the death, dissolution, or withdrawal of the last member

If you want to form your own business, understand the rules governing a NY LLC before doing so. If you plan on operating a multimember entity, sit down with your business partners to discuss how the company will be managed. The more informed you are regarding the state's regulations, the better.

This portion of the site is for informational purposes only. The content is not legal advice. The statements and opinions are the expression of author, not LegalZoom, and have not been evaluated by LegalZoom for accuracy, completeness, or changes in the law.