Forming an LLC in New York – Part 1

Don’t forget the LLC Publication Requirement!

If you decide to go into business for yourself, you’ll eventually want to form a legal business entity. A common type of entity structure for startups and small businesses is the Limited Liability Company or LLC. LLCs are established at the state level and are generally easy to form and don’t have as many requirements as Corporations.

A single member LLC is typically treated as a disregarded entity for tax purposes and a LLC with two or more members is treated by default as a Partnership unless an election is made to tax the entity as a Corporation (either as a C-Corp or sub-chapter S). If you are unsure about the type of legal business entity/structure you should form, seek counsel from a business attorney and/or a CPA.

Once you determine the type of legal business entity/structure you should form, there are various ways you can go about forming the legal business entity. You could do the initial filings yourself with your respective state’s Department of State if you’re well-versed in the process and details. You could hire a business attorney or law firm to do the necessary filings. Or you can also use companies like LegalZoom.com, IncFile.com etc. to do the proper filings.

Companies like LegalZoom.com and IncFile.com will typically prepare and file the necessary documents for a service fee with add-on services available a-la-carte. If you don’t have a complex situation, using LegalZoom.com, IncFile.com and the like can be a cost-effective option. However, in more complex situations, seeking a business attorney or law firm is highly recommended.

That gets us to the actual topic of this post which is the obscure requirement in New York referred to as the LLC Publication Requirement. New York is one of only three states which has this requirement!

So, what is the LLC Publication Requirement?

Well, according to New York’s Department of State, Division of Corporations, State Records and UCC:

“Section 206 of the New York State Limited Liability Company Law requires that within 120 days after the effectiveness of the initial articles of organization, a limited liability company (LLC) must publish in two newspapers a copy of the articles of organization or a notice related to the formation of the LLC. The newspapers must be designated by the county clerk of the county in which the office of the LLC is located, as stated in the articles of organization. After publication, the printer or publisher of each newspaper will provide you with an affidavit of publication. A Certificate of Publication, with the affidavits of publication of the newspapers attached, must be submitted to the New York Department of State, Division of Corporations, One Commerce Plaza, 99 Washington Avenue, Albany, NY 12231. The fee for filing the Certificate of Publication is $50.”

What you may not realize is that companies like LegalZoom.com, IncFile.com and the like typically do not handle the Publication Requirement as part of their service fee nor do they offer an add-on service to handle the Publication Requirement. Some companies do indicate on their site that they do not handle the publication requirement, but it may take some digging around to find the information.

Others may handle it for you for an additional cost (usually the publishing fees plus a service fee) provided you designate them as your Registered Agent (some may offer Registered Agent service free for a year then renew with a monthly/annual service fee).

USACorpInc.com is a company that will handle the Publication Requirement for you without being designated as your Registered Agent. They have a link right on their homepage navigation bar for “NY LLC Publishing.” There are also other companies and small business attorneys that also offer the service for a flat publishing + service fee.

If you don’t mind the work and you’re looking to cut third-party costs, you could opt to take care of the Publication Requirement yourself. Be sure to have a copy of your filing receipt on hand as you will need to provide it to the county clerk when you contact them. The county clerk will provide you with the two newspaper publications where you need to publish along with other important information. You’ll then need to reach out to each publication to place the ad and remit payment.

Depending on what county in New York your LLC is located, the cost to publish in the required two newspapers will vary. For instance, running ads in Manhattan newspapers may cost $1000-$2000 whereas running ads in newspapers located in upstate New York may cost a few hundred dollars. 

There are exceptions to the LLC Publication Requirement for theatrical production companies:

“A limited liability company that is a theatrical production company is exempt from the publication requirements provided the words "limited liability company" appear in its name. Also, a limited partnership that is a theatrical production company is exempt from the publication requirements provided the words "limited partnership" appear in its name. See Section 23.03 of the Arts and Cultural Affairs Law.”

So what happens if you don’t comply with the Publication Requirement?

According to New York’s Department of State:

“Limited liability entities that are formed or authorized to do business in New York after June 1, 2006, which fail to comply with the publication requirements within 120 days after their formation or qualification will have their authority to carry on, conduct or transact any business suspended.

Note that at any time following the suspension of a limited liability entity's authority to carry on, conduct or transact business, the limited liability entity may file the certificate of publication with the affidavits of publication of the newspapers annexed thereto, at which time the suspension of such limited liability entity's authority to carry on, conduct or transact business shall be annulled.”

While there aren’t any fines or financial penalties levied on LLCs for failing to comply with the LLC Publication Requirement, suspension or annulment of a LLC’s authority to conduct and/or operate its business in New York can create potential headaches for your business down the road.

The New York State Senate has circulated several Senate bills over the years to try and update/amend the law with regards to the LLC Publication Requirement, which can be a burdensome cost to startups and small businesses. Until the day the New York State Limited Liability Company Law is updated/amended to remove the Publication Requirement, if you plan to form an LLC in New York, bear this requirement in mind.

Just a side note . . . if you operate a LLC in New York that was formed in another state (aka a Foreign Limited Liability Company or Foreign LLC), you are NOT exempt from the New York LLC Publication Requirement as per Section 802 of the New York State Limited Liability Company Law which reads:

“Section 802 of the New York State Limited Liability Company Law requires that within 120 days after the filing of the application for authority, a foreign limited liability company (LLC) must publish in two newspapers a copy of the application for authority or a notice related to the qualification of the LLC. The newspapers must be designated by the county clerk of the county in which the office of the LLC is located, as stated in the application for authority. After publication, the printer or publisher of each newspaper will provide you with an affidavit of publication. A Certificate of Publication, with the affidavits of publication of the newspapers attached, must be submitted to the New York Department of State, Division of Corporations, One Commerce Plaza, 99 Washington Avenue, Albany, NY 12231. The fee for filing the Certificate of Publication is $50.”