Many people dream of starting a business in New York City, the capital of the world, and becoming a successful entrepreneur. The start of a business is forming a company, which is governed by the state laws of your state.
When you want to form a company, the first thing you need to consider is what type of company you should form. There are many types of corporations, including corporations, limited liability companies (“LLCs”), and limited partnership companies, and each type of corporation has a different scope of liability for its founders and operators and different laws and regulations that apply to it, so choosing a company form is a very important decision. Today, we’re going to focus on one of the most popular forms, the Limited Liability Company, or LLC.
A limited liability company (LLC) can be formed by one person or a group of people. LLCs are favored because they allow the founders to assume a limited level of responsibility for the liability and risk of running the business, and they also offer advantages in matters such as taxes. They can be thought of as a combination of a traditional-style corporation and a partnership. Instead of being called partners or shareholders, the members of an LLC are called members. Members don’t have to be individuals; they can be corporations, partnerships, or even other LLCs.
The members of an LLC must create an LLC bylaw called the Operating Agreement, which must be created at the time the Articles of Organization are filed, which is either before or at the time the company is registered, or no later than 90 days after the registration. This is a very important legal document that governs the operation of the LLC and the rights and responsibilities of the members.
LLC law in New York requires you to either file a registration document called an Article of Organization or publish a notice of formation in two newspapers for six consecutive weeks. The newspapers are determined by the County in which the LLC is located, but due to the length and complexity of the process, we generally prefer the Article of Organization, which can be filed online.
Many people ask if they need an attorney to form an LLC. Although the New York State government does not require a lawyer on its official website, it is recommended to appoint a lawyer because Articles of Organization, Operating Agreements, etc. are legally binding documents with obligations and responsibilities.
You also need to be careful when choosing a company name. First, you need to make sure that the name you’re considering isn’t already registered with the state and used by another company in the same form. This is important because to be recognized as an LLC, your company name must contain legal language indicating that you are an LLC, and certain words or phrases are prohibited from being used as company names. If the name you’re considering is likely to be taken by others, you can ask the state to prevent others from using it for 60 days.
Once you register your LLC, the state will review it and let you know if it’s finalized. If you want a faster turnaround, you can file for an additional fee.
Turning an idea into action can be a daunting task, and how you take that first step sets the tone for the rest of the way. In this sense, the start of a successful business has a huge impact on the flow of the business. No matter how good your business idea is, if you register your business under the wrong business entity or make a legal mistake in registering your business, your first steps will be slowed down or made more difficult.
We hope this column has been helpful to you as you organize your new business. If you have any further questions about company formation, or if there’s a law you’d like our readers to know about, please don’t hesitate to contact us at mail@songlawfirm.com. I’ll incorporate them into my next column.
