Scarinci Hollenbeck, LLC
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201-896-4100 info@sh-law.comFirm Insights
Author: Scarinci Hollenbeck, LLC
Date: September 7, 2021
The Firm
201-896-4100 info@sh-law.comLimited liability companies (LLC) are one of the most popular forms of business entity in the United States. In fact, statistics show that the formation of LLCs outpaces new corporations in many states, including New York. Limited liability companies are attractive because they offer all of the advantages of a general partnership form, with the added bonus of limited liability for its members, without all of the formalities required of a corporation.
When deciding what type of entity (e.g., partnership, LLC, corporation) is best suited for your business, it is important to understand the advantage and disadvantages with regard to management, liability, and taxes. Below are several key advantages that often tip the scale in favor of LLCs for many New York business owners:
Corporations, of course, do have certain advantages that businesses should take into consideration. For instance, a corporation can go public and is more easily transferred through stock purchases, which can be attractive to investors, such as venture capitalists.
There are several required steps to legally form an LLC in New York. Pursuant to Section 203 of the Limited Liability Company Law, organizers form an LLC by filing the Articles of Organization with the Department of State. Organizers may be, but need not be, a member of the LLC formed and can be an entity or individuals.
The members of an LLC are required to adopt a written operating agreement. With the provisions of the operating agreement tailored to each unique business, an operating agreement generally sets out how the LLC will operate, including the scope of the LLC operations, the rights and obligations of its members, the contributions/ownership percentages of the members, the distribution of profits and losses, and the mechanisms for resolving disputes.
In accordance with Section 417 of the Limited Liability Company Law, the operating agreement may be entered into before, at the time of, or within 90 days after the filing of the Articles of Organization. The Operating Agreement, however, is an internal document of the LLC and need not be filed with the Department of State.
Additionally, Section 206 of the Limited Liability Company Law requires a copy of the Articles of Organization or a notice related to the formation of most LLCs to be published in two newspapers for six consecutive weeks. The newspapers must be designated by the county clerk of the county in which the office of the LLC is located.
The information in the published notice, including the name of the LLC, must be identical to the Department of State’s records exactly as set forth in the initial articles of organization. The printer or publisher of each newspaper will provide an affidavit of publication. A Certificate of Publication, with the affidavits of publication of the newspapers annexed thereto, must be submitted to the Department of State. Failure to publish and file the Certificate of Publication with the Department of State within 120 days, will result in the suspension of the LLC’s authority to carry on, conduct or transact business.
Since every business is unique, it is best to go over your entity options with an experienced attorney. At Scarinci Hollenbeck, our attorneys routinely assist businesses of all sizes in selecting the proper form and completing all of the requirements to get up and running.
If you have any questions or if you would like to discuss the matter further, please contact me, Thomas Herndon, Jr., or the Scarinci Hollenbeck attorney with whom you work, at 201-896-4100.
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