Company formation laws in New York
Table of contents
LLC Formation in New York
The state of New York recognizes many forms of businesses like limited liability company (LLC), corporation, limited partnership, general partnership, sole proprietorship and others. Each has its own advantages and disadvantages. As The Department of State does not offer any advice to decide a business formation, careful analysis and legal counsel is recommended before forming an LLC.
- Forming an Limited Liability Company (LLC): The organizers form an Limited Liability Company (LLC) by filing the Articles of Organization with the Department of State as per Section 203 of the Limited Liability Company Act. Any individual or business entity may act as an organizer.
- Specific responsibilities associated with an LLC: The members or organizers of an LLC are required to adopt an “Operating Agreement” in writing and that is before, at the time of, or within 90 days after the filing of the Articles of Organization. An operating agreement of any LLC establishes the rights, powers, duties, liabilities and obligations of the organizers or members of the LLC. An Operating Agreement is a document primarily for the internal use of the LLC and not required to file with the Department of State.
- Publication requirements associated with the formation of an LLC: As per Section 206 of the Limited Liability Company Act, a copy of the Articles of Organization or a notice regarding the formation of the LLC needs to be published at least in 2 newspapers for 6 consecutive weeks. The county clerk of the county where the LLC has been formed must assign the newspapers. Again, the name of the LLC in the newspaper must accurately match the Department of State’s record.
- Necessity of a lawyer: Formation of Articles of Organization do have legal consequences and Operating Agreement creates rights as well as responsibilities, which are legally binding. Therefore, though a lawyer is not a necessity while forming an LLC, using the services of a legal professional is advisable.
- Taxation of an LLC: Regarding income taxes, the federal tax regulations allow an LLC to be taxed either as a corporation or partnership. Usually, state law follows federal law for income tax purposes. However, state law imposes a tax based on the number of members the LLC has. Again, depending on the type of business it carries out, the LLC may have to pay or collect sales taxes, withholding taxes and others.
- Choosing a name: The name of an LLC must include the words ‘Limited Liability Company’ or the abbreviation ‘LLC’ or ‘L.L.C.’ The LLC’s name must be clearly distinguishable from the names of other LLC’s, corporations or general partnerships on file with the Department of State. Moreover, as per Section 204 of the Limited Liability Company Act, a list of words and phrases are prohibited from using in the name of an LLC. In addition, certain words or phrases require the consent of other agencies before filing the Articles of Organization with the Department of State.
- Filing fees: The filing fee for Articles of Organization is $200. The fee can be made by cash, check, money order, MasterCard, Visa or American Express. Checks and money orders should be made payable to the “Department of State.”
- Filing the Articles of Organization: You can send the completed Articles of Organization by mail with the filing fee of $200 to the Department of State, NY, Division of Corporations, State Records and Uniform Commercial Code, One Commerce Plaza, 99 Washington Avenue, Albany, New York 12231.
You can also fax your Articles of Organization along with a credit card/ debit card authorization form to the Division of Corporations, State Records and Uniform Commercial Code at (518) 474-1418.
Non-profit Corporation Formation in New York
This article is intended to provide you with an overview of the process and the forms required to incorporate as a non-profit or 501(c)(3) corporation in the state of New York. Nonprofit corporations are generally formed for religious, charitable, scientific, literary, or educational purposes and are eligible for federal and state tax exemptions. Although incorporating as a not-for-profit organization or filing for tax-exempt status does not require assistance of an accounting professional or legal guidance, such guidance is always advisable as the rules and regulations are very complex and prolonged.
In order to form a 501(c)(3) tax-exempt corporation in the state of New York, you need to form a nonprofit corporation first by filing a certificate of incorporation, and only then apply for tax-exempt status from the Internal Revenue Services (IRS) and the State of New York. Below are the details:
- Choose the founding board of directors: In the state of New York, a nonprofit corporation should have three or more directors on its board of directors.
- Choose a name for your 501(c)(3) corporation: The name of your nonprofit corporation should not be similar to the name of another nonprofit corporation filed with the New York Department of State. Again, your nonprofit corporation’s name must contain either of the words - ‘corporation’, ‘incorporated’, ‘limited’, or abbreviation unless the company is incorporated for charitable or
- File your nonprofit certificate of incorporation: You are required to prepare and file a nonprofit certificate of incorporation with the New York Department of State. This certificate should include basic information like the name of your nonprofit, the statement of purpose, certain provisions for tax-exempt purposes, and the name and address of your registered agent.
- Prepare bylaws for your nonprofit corporation: You are required to create some bylaws, which will contain the rules and regulations your corporation will comply with for internal procedures, holding meetings, electing officers and directors, and obeying other corporate norms in the state of New York.
- Hold a meeting of your board of directors: The first board meeting of a nonprofit company is usually referred to as organizational meeting of the board. The board should take the following actions:
- Approving the bylaws
- Appointing officers
- Concluding on an accounting period and tax year, and
- Approving the opening transactions of the corporations
- Set up a corporate records binder: It is very important to set up a corporate record binder so that you can keep significant documents such as your certificate of incorporation, bylaws, and minutes of meetings of your nonprofit corporation.
Now as you have created your nonprofit corporation, you can seek federal and New York tax exemptions. Below are the things you need to do to obtain tax exempt status for your nonprofit corporation.
- Submit Form 1023 federal tax exemption application: It is sensible to apply for federal tax exemption before you go for New York state tax exemption. In order to receive federal tax-exempt status, you have to prepare and file IRS Form 1023 with the IRS. This Form 1023 asks you for detailed information regarding your organization, its history, finances, organizational structure, governance policies, operations, activities, and much more.
- Receive New York state tax exemption: Once you have received federal tax exemption status, you need to go for state tax exemption status. New York’s tax agency has a form that you need to file to obtain exemptions from income, property, sales and other state taxes.
- Other state reporting and registration requirements: Depending on the size of your corporation and activities, you may need to register with the attorney general of the state before jumping into any fund raising activities. Check out with the New York attorney general’s website for additional guidelines at www.charitiesnys.com.
This document is not a comprehensive detailed guide to form a nonprofit corporation in New York. It’s just intended to push you to the right direction. The processes may run smoothly if you hire services of legal and accounting professionals.