The New York Department of State has reported around a 30% increase in the formation of new LLCs in the state, which has led to the creation and growth of an entrepreneurial ecosystem. It’s understandable that these new business owners have chosen to start a Limited Liability Company. An LLC offers personal asset protection, tax benefits, and unlike a corporation it has a simple structure with less regulation, which means that LLC formation is typically faster than incorporation. In this guide, we’ll discuss information about doing business in the Empire State, how to start an LLC, and LLC formation time frames in the state.
Discovering New York
Many people aren’t aware that New York City was originally the country’s capital for around a year when the country was first founded.
New York borders Lake Ontario, Canada, the Atlantic Ocean, Pennsylvania, New Jersey, Lake Erie, Vermont, Connecticut and Massachusetts. The Adirondack, Appalachian and Catskill Mountains run through it, and the highest mountain in the state: Mount Marcy. The Hudson and Mohawk Rivers are located in New York, too. You can find beaches, bays, islands (like Staten and Long Island as well as the Thousand Islands between Canada and New York), forests and waterfalls.
New York’s natural resources include salt, gravel and limestone for construction materials. It’s one of the biggest producers of garnet, and surprisingly it’s used in industrial applications rather than jewelry. And it’s the only state to mine a material used in paints and ceramics called wollastonite.
Economic Overview of New York
New York’s GSP or Gross State Product is $1.6 trillion, with a growth rate of 27.4k% between 2018-2023, which is the third highest growth rate in the country. The top industries in New York according to revenue are Commercial Banking, Portfolio Management & Investment Advice, Public Schools, Hospitals, and Life Insurance & Annuities. The biggest employers in the state are the City of New York, the New York City Department of Education, the State University of New York, Northwell Health, and the Metropolitan Transportation Authority. The sectors that make the biggest contributions to New York’s Gross Domestic Product are Finance & Insurance, Information, Real Estate & Rental & Leasing, Professional, Scientific & Technical Services, and Healthcare & Social Assistance.
Business Environment in New York
The stock market is obviously big in New York. Everybody knows about Wall Street, and how cut-throat that industry is. But how does that translate to the business environment in New York?
Usnews.com ranks New York #27 for business environment, #46 for employment, #47 for affordability, #39 and for economic opportunity. The cost of living index in the state is 109.5, nine and a half points up from the national 100.0, the average household income is $74,314 (the national average is $69,717) and the poverty rate in the state is 13.9%, 1.1% up from the national average of 12.8%. That should tell you that even if the average wage is slightly higher than the national average but the poverty rate is still high, it’s expensive to live and work in New York.
State-Specific Regulations and Incentives for Forming an LLC in New York
New York has several different incentives for forming an LLC.
- Excelsior Jobs Program: This is the major economic development program in New York, providing tax credits for companies in certain industries that are creating jobs, or making capital investments. The qualifying minimum number of new jobs differ depending on industry. Here are the tax credits available through the program:
Job Tax Credit: This credit goes up to 6.85% of wages per each new job to cover a percentage of the payroll cost.
Investment Tax Credit: This is a tax credit for up to 2% of investments, 5% of investments on green projects, childcare services or green CHIPS projects.
Research and Development Tax Credit: This is a credit for up to 50% of Federal R&D credits up to 6% of research expenses in New York.
Real Property Tax Credit: This is a credit for companies that locate in qualifying distressed areas, as well as for Regionally Significant Projects, as well as businesses in certain industries that exceed employment or investment minimums.
Childcare Services: This credit for up to 6% of new childcare operating expenses, including direct financial support or sponsorship of childcare services programs.
- Relocation Employment and Assistance Program (REAP): This program offers tax credits against a city’s unincorporated business tax, banking corporation tax, general corporation tax or utility tax. It’s an incentive of up to $3,000 per employee share per year for 12 years, provided that the project is in a designated revitalization area. Projects in other areas receive tax credits of $1,000 per share. They’re refundable during the first five years, and can be carried forward five years if they’re unused. And the application deadline has been moved to June 30, 2025.
- Brownfield Cleanup Program (BCP): This is a program that provides tax credits to aid in site cleanup or redevelopment of brownfield sites. If the credits are for redevelopment, they can be increased based on the cleanup level and location of the site.
- Life Sciences Tax Credit Program: This program was created to assist new life sciences businesses who locate, invent, commercialize or produce in the state. It offers a tax credit of 15% for businesses employing at least 10 employees, 20% for businesses employing less than 10 employees. The maximum award is $500,000 per year up to three years. The state has chosen to give priority to life sciences projects.
- Sales Tax Exemptions: The purchase of machinery, equipment and property for production, materials for manufacturing and R&D, fuels and utilities used for manufacturing and R&D are exempt from sales tax. Economic development projects could receive a 100% tax exemption of state and local sales taxes from the Industrial Development Agencies (IDA).
- Start-Up NY: Under this program, tax-free zones have been established in areas that are either in or near community colleges, public universities, technical schools, etc. affiliated with SUNY (State University of New York). There’s a focus on creating jobs and investing in private sectors near college campuses around Upstate New York. Early-stage and start-up companies which relocate or expand to New York and partner up with colleges and universities can get an exemption from state corporate income taxes for 10 years. Employees working for certain businesses qualify for an exemption from state personal income taxes for the first half of the 10 year program. During the 6th year, but ending in the 10th, income taxes on the initial $200,000 annual income earned are exempt. Applications for this program must be submitted by December 31, 2025.
- Employee Training Incentive Program: Businesses that make capital investments could be eligible to receive employee training benefits. There’s a refundable tax credit available to employers to use for skills training that either improves employee productivity or upgrades it. The credit is for 50% of training costs and it caps out at $10,000 per employee. You can receive the credit for both new and current employees. There’s an internship program that provides credits of 50% of the stipend paid to interns, capping out at $3,000 per intern.
Pros and Cons of Establishing an LLC in New York
You have to take the good with the bad to do business in New York, but you can’t take either if you don’t know about them! Here are the pros and cons of forming an LLC in New York.
New York has long been known for being a bustling business center. It’s one of the most influential states in the whole country. Because it’s an economic hub, it has things that other places don’t, like cultural experiences and businesses (art, theater, etc.), Wall Street, connections with both private and public sectors and public transportation. Even companies that have located in nearby states still typically keep one location in New York.
The state is home to a huge consumer pool and they typically have a lot of disposable income. It has a population of 8 million, and that gigantic consumer market can’t be overstated. Because of its size and the fact that there’s so many cutting-edge technological advancements that are introduced in the state, tests are often conducted in the state to predict global buying trends.
New York has a workforce full of the best and brightest. People move to New York for opportunity, which means that you’ll have no problem finding qualified employees and creating a diverse environment.
Here are some of the drawbacks.
The cost of doing business in New York is extremely high. The highest tax bracket is 14.78%, the sales tax (city, county and state all accounted for) is 9.25%, and the corporate income tax rate is 6.5%.
New York is well-known for having the highest cost of living in the nation. Gas prices are somewhere between $4.62-$5.84.
It also has some of the most expensive rent rates for offices in the United States. Class A office space runs around $80/square foot. That’s not good news for small businesses.
Procedure of Establishing an LLC in New York
Before you worry about formation timelines, you need to submit your paperwork to the Department of State. Here’s what you need to know about forming a Limited Liability Company in New York.
- Get an Articles of Organization Form: To apply for your LLC, you need an application, right? And the Articles of Organization functions as that application, as well as being your primary formation document. This form is available at the New York Department of State Division of Corporations.
- Choose a Name for Your LLC: Business names require careful consideration. Just because you think of something that sounds cool doesn’t mean you can use it. Legal requirements in New York stipulate that businesses can’t use business names that closely resemble names that another business is already using. To determine whether your chosen business name is available, run a search of the business name database that the New York Department of State Division of Corporations has compiled. Once you’ve identified a name available for use, you must file a Reservation of Name form with the Department of State, too.
- Pick a Registered Agent: Every LLC in New York must have a registered agent. Your registered agent’s information must be listed on your Articles of Organization, and your Operating Agreement, so you can’t even file for an LLC without a registered agent. This is a legal term for a person or business who accepts legal notices (like service of process) and mail from government agencies on behalf of your company at their address.
- Choose Your Address: Your business address isn’t something you should choose willy-nilly. It’s public information and everyone has access to it, which makes using your home address a bad idea if you value your security and privacy. Instead, you could use a virtual address, virtual office, or ask to use your registered agent’s address.
- Sign and File Your Articles of Organization: Once you’ve filled everything out, all that’s left to do is to sign and file the form with the New York Department of State Division of Corporations State Records and Uniform Commercial Code.
Necessary Documentation for Filing an LLC in New York
Just because your Articles of Organization is the primary formation document, it’s not the only document you need. These are some of the other paperwork you’ll need to gather.
- Employer Identification Number (EIN): Your business will need an EIN or Employer Identification Number for various business activities. It’s how the IRS and other government agencies identify your business, as the number is unique to it. Once you have your EIN you can open a business bank account, fill out a variety of government or tax forms, apply for incentives, hire employees, and more. To get an EIN for free, just head to the IRS website and fill out the application, then immediately receive your EIN.
- Name Reservation Application: You must file a Reservation of Name application with the Department of State along with your Articles of Organization.
- Articles of Organization: As your primary formation document, it’s critical to have your Articles of Organization ready to go when you file. It lists a plethora of information about your business, such as its registered agent, name, address, purpose, duration, management style, and a list of LLC members and their contact information.
- Operating Agreement: An operating agreement isn’t a legal requirement from the Department of State, but rather is a recommendation. It describes all aspects of your business’s operation, as well as LLC member duties and how they should perform them. Aside from contact information, it lists the contributions of LLC members, how profits and losses will be distributed, how members should be added or removed, the procedures that will take place if an LLC member dies, and information about managers, such as their voting rights and meeting schedules.
- Initial Reports: Every two years, LLCs in New York are required to file Biennial Reports. This updates all of your business’s information with the Department of State, and the first one you file with your Articles of Organization is called your Initial Report.
- Tax Registration: You’ll need to register with the Department of Taxation and Finance as a sales tax vendor to collect sales tax.
- Business Licenses: You need a New York state business license, which you can get from the NY License Center. For county and city licenses, you’ll need to inquire with city and county clerks.
Legal Requirements for Starting an LLC in New York
Outside of submitting your Articles of Organization, New York also has a publication requirement. This means that you’re required to publish your LLC’s Articles of Organization in two different newspapers approved by the county clerk within 120 days of the formation of your Limited Liability Company. You’ll get affidavits from both newspapers, which you can use to get a Certificate of Publication to file with your Articles of Organization.
Time Frame for Establishing an LLC in New York
Once you’ve submitted all of your documents and paid the filing fees, it can help to know about the formation time frame so you’ll know what to expect.
First, you need to know that there’s a difference between processing time and approval time. Processing time is the amount of time it takes for the Department of State to review your documents and enter the data into their system. Approval time is the total turnaround from the time you submit your documents to the time your LLC is approved, which includes processing time and mail or transit time.
How Long Does the Initial Paperwork Take in the State of New York?
Approval time to file by mail is approximately 8.5 months, and processing time to file online is immediate.
Processing Times in the State of New York
Processing time for filing by mail is 8 months, or immediately for online filing.
Common Delays in the LLC Formation Process in New York
There are several things that can delay your formation time in New York.
- Filing Method: If you choose to file by mail without expedited processing, it will take around eight and a half months before your LLC is approved. Also, there’s a delay on 24-hour expedited processing that slows it down by a few days because of the number of people choosing that particular filing option right now.
- Issues with Your Documents: If your documents don’t include required information, there are errors in the information, you’ve made a typo, or you don’t include the correct number of copies (usually two), then your documents could be rejected. Starting the formation process over again certainly causes a delay, so it’s imperative that you make sure all of your information is included and correct!
- When You File: The New York Department of State only processes LLC filings on business days, which are Monday-Friday and don’t include government holidays. This means you shouldn’t file immediately before the weekend or holidays because it will cause delays.
Expedited Processing for LLC Formation in New York
Expedited processing is the best option for getting an LLC expeditiously. Here’s what you need to know about expedited processing.
What Are the Expedited Options Available?
The New York Department of State offers the following expedited processing options: 24 hour processing, same-day processing, and 2- hour processing.
It’s important to point out that the New York Department of State does still offer expedited processing, but you can expect a delay up to a few days on 24-hour processing due to the high number of people who choose expedited filing options. Same-day and two-hour processing aren’t delayed.
Additional Costs for Expedited Services in New York
You have to pay the fee for expedited processing in addition to the filing fees for LLC formation. Here’s a look at the costs for expedited processing in New York.
24-hour processing: $25 extra
Same-day processing: $75 extra
2-hour processing: $150 extra
Comparing LLC Formation Time Frame in New York with Other States
Learning about the formation times of other states is a key element of understanding the formation time frame of your own state, and the information can be helpful when deciding whether to establish a domestic or foreign LLC.
Brief Comparison with Key States
Processing times for mail filings in New York take around 8 months, processing time for online filings is immediate, and there are expedited filing options as fast as two hours.
Eight months processing time to file by mail is by far the slowest in the country. But there are also slower states in other regards. In Arizona processing time for online filing is 14-16 days, it’s two weeks in Maryland, 13-15 days in Texas, and 12-14 days in Washington. Alaska, Arkansas, Idaho, Indiana, Kansas, Kentucky, Mississippi, Missouri, Nebraska, New Mexico, Oregon, Rhode Island, Tennessee, Vermont and Wyoming don’t provide any sort of expedited processing. And although Maryland and Arizona offer expedited processing, it takes 7 and 5 days, respectively.
Conversely, expedited processing takes an hour in Delaware, Michigan, Montana, Nevada and West Virginia. And mail processing takes 1-2 days in Alabama, Massachusetts, and South Dakota, and one day in Ohio and Kentucky.
Why is New York a Favorable Place for Forming an LLC?
New York is a good option for forming an LLC because it’s a well-known business hub, there is a large consumer pool with disposable income, and it’s home to some of the best and brightest work talents.
