Rules Governing a New York LLC

By Joe Stone

The New York Limited Liability Company Law establishes the basic rules governing a New York LLC. The law requires that every New York LLC have two important documents: articles of organization, which creates the LLC, and an operating agreement, which specifies the internal affairs of the LLC and defines the relationship among the LLC’s owners, called members. As with all other New York businesses, whether a corporation, partnership or sole proprietorship, there are additional rules that every New York LLC must follow regarding such matters as taxation, licensing and insurance.

Articles of Organization

To create a New York LLC, you must file articles of organization with the department of state. The articles contain the minimum information required by New York LLC law, which includes the name of the LLC, the county where the LLC's principal office is located and a statement appointing the secretary of state as registered agent for the LLC, along with an address of record that the secretary can use to mail any service of process to the LLC. If the members desire to change the LLC's name, county of principal office or appoint a private registered agent, an amendment to the articles must be filed with the department of state.

Operating Agreement

A written operating agreement is mandatory under New York LLC law and must be made within 90 days of filing the LLC’s articles of organization. This document is a private agreement among the LLC’s members and is not filed with any government office. The purpose of the operating agreement is to establish the rights and obligations of the LLC members among each other and with respect to the LLC. Because each LLC has unique business needs, New York LLC law gives LLC members significant flexibility regarding what provisions to include in an operating agreement. Despite the mandate to have an operating agreement, New York LLC law does not specify the consequences to any LLC or its members that fail to make a written operating agreement; however, if member disagreements wind up in court, the members and LLC will be subject to the default provisions of New York LLC law, which may not necessarily be what the members intended.

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Tax Rules

An LLC is not a recognized business entity under federal income tax law; an LLC must file as a corporation, partnership or sole proprietorship tax return. New York state tax law follows the federal law in this regard. Some basic tax rules that the LLC must follow are obtaining a taxpayer ID number from the IRS and, depending on the LLC business operations, remitting sales taxes or withholding taxes. New York law also imposes an additional tax rule on LLCs that are required to file a New York State partnership return, which includes New York sources of income, gains, losses or deductions. The LLC must pay a fee based on the total number of LLC members multiplied by $50, with a minimum payment of $315 and maximum of $10,000.

Other Business Rules

Every New York business, including an LLC, will have to comply with other state and local regulatory rules, depending on the requirements and activities unique to its business operations. For example, certain types of business activities require licenses or permits as a prerequisite for starting operations, such as accounting or engineering business. To facilitate determining the applicable permit or licensing rules for a particular business type, the New York State Governor's Office of Regulatory Reform maintains an online feature that assists business owners in determining the permit and licensing rules to start or expand any type of business in New York state (see Resources).

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What Are the Tax Advantages of LLCs?

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What Is an LLC License?

A limited liability company is a type of business structure that shields the owners of the company from personal liability for the financial dealings of the operation. An LLC does not pay federal taxes since the profits are only reported on the owner's tax return as personal income. The creation of an LLC is governed by state law and members must file certain documents with the appropriate state department to gain approval to operate as an LLC.

Who Does a LLC Have to Show Financials To?

Keeping accurate accounting records is part of your responsibility as an owner of a limited liability company. Using the data from your company's books, you can generate financial reports to gauge the health of the business. Most entrepreneurs wouldn't want competitors or other outsiders to have access to this proprietary information about their businesses; however, certain parties have a right to see your LLC's books and related financial records upon request.

How to Create an LLC for Investments

Limited liability companies, or LLCs, are flexible business entity structures that have characteristics of a corporation as well as a partnership. However, each state can impose different requirements to create a LLC, though in most jurisdictions, the formation process is similar. Moreover, most state laws allow you to form a LLC for any legitimate purpose, such as to hold and trade investments.

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