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You have a mind-blowing idea for a New York City business, but you don’t know the first steps to take in how to make it happen.
I keep hearing about LLCs, should I start one?
How do I know if an LLC is right for me anyway?
An LLC is a type of business type that provides Limited Liability Protection and pass-through taxation for the owners. It is an entity separate from the owners with its own set of rights and responsibilities.
This is different than a Sole Proprietorship or Partnership where the business is the person or people running it. Sole Proprietors and Partners have no benefits or protections, unlike with LLCs or Corporations.
Here’s Are The Reasons You Should Be Starting Your NYC LLC Today:
1. Easy Set Up
Creating a LLC requires upfront costs, as does any business, but the upkeep is cheap and will require far less from owners in the beginning. To form a New York LLC, applicants must file Articles of Organization. These can be sent via mail, fax, or online (which is recommended because the process is much faster this way). Filing through mail or fax can take between 3-4 weeks. The state filing fee is $200. Once the state approves the Articles of Organization, applicants will receive the business’ EIN number. With the EIN number and the approved Articles of Organization, we recommend opening a business bank account, which can be done at most banks. However, there is still another step to the LLC start-up process.
New York state requires LLCs to publish in 2 newspapers for 6 consecutive weeks. The publication should be completed within 120 days of receiving the EIN number. This is what the bulk of the cost of an LLC goes towards. As you may know, print isn’t popular anymore, which means print is also expensive. Once the LLC has been published, the paper will deliver proof of publication. The proof of publication needs to be sent to the New York Department of State along with a publication affidavit and a $50 dollar filing fee.
Another cost to consider is drafting the Operating Agreement, as the LLC will need one to properly structure the business and establish ownership between members. The Operating Agreement will be a legally binding contract between the members. All in all, the set up may cost more but an LLC is much easier to establish and maintain than Corporations in New York. For more information you can visit our page on starting an LLC.
2. Personal Protection
LLCs offer limited liability protection, meaning that the business will separate your personal assets from the business assets. Should the business be sued (which happens far more than you’d think) or accrue debt, your personal assets can’t be touched by the claimant. If you’re in a sole proprietorship r partnership, there is no separation of business and personal assets which could have disastrous consequences.
It’s a scary statistic, but 75% of start-ups fail. Suppose, worst case scenario, your dream company doesn’t work out, and now you’re buried in business debt. Naturally, you would begin to worry: Could I lose my apartment? Will they take away my savings? With an LLC, no and no. Creditors can’t go after your personal assets in order to pay off business debts, so you can breathe a sigh of relief. To learn more on protecting your assets you can read here about Limited Liability Protection.
3. Pass Through Taxes
Who likes paying taxes? If you were interested in a Corporation instead, there is a huge issue that you may face as a small business owner. Corporations are double-taxed, meaning that the business will pay taxes and then shareholders will also pay taxes on any profit they make through dividends. An LLC is taxed just as a sole proprietorship or partnership, meaning that taxes pass through the business and directly to you as personal income tax. This is a much simpler way for small business to manage and minimize taxes.
4. Fewer Rules and Restrictions
Unlike Corporations, LLCs are more flexible. LLCs don’t have to form a Board of Directors and assign Corporate Officers. LLCs don’t have to keep minutes and won’t run into as many issues in transferring ownership. People often compare S-Corporations and LLCs, but LLCs have certain benefits over an S-Corporation as well. S-Corporations are still bound to the same structure as normal Corporations, which means also assigning a Board, Officers, and recording Minutes. In an LLC, there can be an unlimited number of owners and profit sharing is much easier. S-Corporations can only have 100 shareholders, and none of those shareholders may be other Corporations, LLCs, or trusts.
5. Business Identity
Whether it’s proving your company is legitimate to potential clients and customers or establishing business credit, credibility goes a long. Since your business is a separate entity, you can create a new credit profile. Have bad credit? No problem. Your LLC’s credit has nothing with your personal credit history.
When it comes to establishing your brand, the first step should be to secure a name, right? Even if you have a DBA as a Sole Proprietor, you don’t have the rights to that name. Creating an LLC grants you the right to that name on a state level, meaning no other business in New York would be able to use that name. This will be important down the road as well when you file for Trademarks. Having an established business with the name or logo you want to Trademark will strengthen your case with the USPTO. Obtaining your business name now creates a stepping stone for your future branding effort. You can also find out more about how to build a brand.
How You Can Start An LLC
We explained how you can start your own New York LLC, but frankly the process is still time-consuming and making the wrong choices can be pricey. Fisher Stone can start an LLC for your for one flat fee. If you’re starting your LLC in New York we will form the business in 24 hours, take care of publishing, AND draft you an operating agreement. If you have any questions about NYC LLCs or would like to speak to our team about setting up your business, you contact us here. Also please visit our page on starting an LLC.
