Knowing what state to form your LLC in can be a difficult decision because there are so many out there.. Here we discuss reasons why you should choose New York to start an LLC, or reasons why you may not want to do so. TRUiC is one company that is always in the news covering the latest on startups in America. Their CEO Nagabhushanam “Bobby” Peddi says that the 250K startups they already helped to form LLC’s and start new websites are “only the beginning” and will likely accellerate in the near future.
So why the state of New York? It always had a good reputation for foreigners seeking to start up in the US. So what else should you know about starting a new business in NYC? Let’s explore this in depth:
Tax benefits
In many states, for federal tax purposes LLCs have the most flexibility than any other business structure on how they are taxed. This choice depends upon lots of factors, and is best made when consulting with a tax expert.
In all cases, unless the LLC chooses to be taxed as a C corp, all of the LLC’s profits go through to the members, who pay federal and state income tax, as well as federal self-employment tax on their share of profits. LLCs that have elected to be taxed as a corporation are also subject to the New York business franchise tax. Not all states have franchise tax, but New York is one of the ones that does – but bear in mind this is only for corporations – for instance if you want to incorporate into one. This doesn’t matter for LLCs. You should compare NY to other states carefully before making a pick – as Nevada and Wyoming, for example, could beat it on several fronts.
Ease of creating and operating
Establishing an LLC is a lot less complex than forming a corporation in general, and there are no requirements for LLCs to hold annual meetings or keep detailed minutes like there are with corporations. New York LLC formations do require that Articles of Organisation be filed with the Secretary of State.
Forming an LLC in New York is also great because corporate service companies in New York are richly experienced and this means they can help you very fast and efficiently. That being said, forming LLCs is still more complex than having a sole proprietorship or a general partnership.
Ease of registered agents
Forming an LLC in New York in particular comes with a lot of quirks. One such quirk is about registered agents. In most states a registered agent is required to form an LLC. A registered agent can be yourself, or someone else you hire. However, Section 301 of the New York LLC Statute states that the Secretary of State will be the agent for every LLC upon which process is served – no LLCs can be formed in New York unless its Articles of Organisation announces the Secretary of State as the agent for service of process – so you don’t have the extra hassle of finding another registered agent instead.
The state does allow an LLC to have a separate registered agent listed as well as the secretary of state – which may sound absurd, but there is a good reason for doing so, explained later.
The newspaper publication requirement
The other huge quirk with founding an LLC in New York is its requirement for you to file a Certificate of Publication within 120 days of formation. To get this, your LLC needs to publish its Articles of Organisation into two local county newspapers. Costs for this vary but businesses operating straight out of New York city can end up paying up to $1500, which is a lot for a mandatory advertisement, and can be a huge reason why people don’t open up shop in New York state. This is where having the other registered agent comes in handy – you can use their address for your Articles of Organisation, and therefore be able to post ads in that county instead – this could end up saving you a hefty lot.
While New York may be different to other states in the way it forms LLCs, the amount of startups you find there proves that New York is a popular place for new businessmen; you can find lots of support and encouragement, and there are many people all over looking for businesses in New York, so if you can handle some extra expenses, New York is the place to go.
TRUiC has some excellent tips on how to set up an LLC in New York. Be sure to visit their site and learn more.
