New York’s Irrational LLC Publication Requirements Hurt Business Owners and Benefit Special Interests
In New York, a Limited Liability Company must publish, within 120 days of its formation, a notice in two general-circulation newspapers (one daily, one weekly) in the county where the LLC was formed. The notice has to run once a week for six weeks and include a number of facts concerning the company and its formation. If an LLC doesn’t fulfill the publication requirements, the company’s authority to do business in New York can be suspended.
The costs of publication vary widely from county to county, ranging from around $300 in some counties to over $1,600 in New York County (Manhattan). Generally, publication costs are higher “downstate” (the five boroughs of New York City, Westchester County and Nassau and Suffolk Counties on Long Island). Publication costs depend entirely on the advertising rates charged by the newspapers that are designated by each county clerk for publication.
The irrationality of the publication requirement is illustrated by the role of one designated newspaper: the New York Law Journal. If your LLC is located in New York County, your notice must be published in the NYLJ and one other paper that is chosen at random by the New York County Clerk’s office. The NYLJ is a designated paper in other counties as well (though those counties at least give you a choice among daily papers).Why the NYLJ is considered a “general circulation” newspaper is a mystery: while it carries a number of different types of legal notices, it’s mainly read by lawyers.
Purportedly, the publication requirement is intended to let members of the public know who they are doing business with. Frankly, I don’t know any member of the general public—or even any businessperson who is not also a lawyer—who reads the legal notices in the newspaper. And anyone who is really interested in finding out more about any particular LLC can easily find this information, at no cost, at the New York Secretary of State’s website.
Since the publication requirement is antithetical to New York’s general public policy of encouraging robust commercial activity in the state, what explains the law’s existence? The answer is special interest politics. As then-Attorney General Eliot Spitzer observed in his official Memorandum to Governor Cuomo:
As you might expect, there was strong lobbying in favor of the publication requirement from a number of representatives of New York media. While those who supported publication did so on the alleged argument that it would increase public knowledge, it was my belief at the time that the publication requirement was solely an attempt to preserve a benefit for certain publications that derived considerable income from the publication of partnership notices. However, it was also my view at the time that it would be difficult if not impossible for the bill to pass without a publication requirement because of the support that media interests generated among legislators.
Because of the costs imposed by the publication requirement, business owners should think twice before forming an LLC in New York, particularly in the downstate counties.
[...] widely agree that New York’s LLC publication requirement hurts both small businesses and the state itself. It hurts small businesses by increasing the [...]
[...] Our last post about New York’s LLC publication requirement drew some heated comments from small business owners who are frustrated by this anachronistic requirement. Although we advise our clients to comply with the requirement, we know that many do not do so. We decided to investigate whether non-compliance has any practical consequences. [...]
Given how corporate law is structured, it’s less of a barrier to entry for small businesses than it is an incentive to form a C-corp or S-Corp instead (which aren’t subject to the requirement). Entrepreneurs who want to do business in NY won’t throw their hands up and give up because a LLC costs too much — they’ll just choose a corp structure instead.
A ridiculous requirement nonetheless.
[...] In New York, a Limited Liability Company must publish, within 120 days of its formation, a notice in two general-circulation newspapers (one daily, one weekly) in the county where the LLC was formed. The notice has to run once a week for six weeks and include a number of facts concerning the company and its formation. If an LLC doesn’t fulfill the publication requirements, the company’s authority to do business in New York can be suspended. (See, http://www.eminutesonline.com/new-york%e2%80%99s-irrational-llc-publication-requirements-hurt-busine…). [...]
[...] is unsubstantial. Crain’s recently wrote an article about it and I’ve found numerous other posts about the [...]
Rather than try to circumvent the law in this way, the first approach would be to consider forming a S-Corporation. For the most part, S-Corporations will work nicely for small businesses and they are not subject to the NY LLC publication requirement. Because of the way that many states (New York and California in particular) have tinkered with the fees that apply to LLCs, we use LLCs as entities of last resort. Take a look at this video http://www.eminutesonline.com/should-i-form-an-llc/
Thanks for writing this excellent article – I agree with everyone above that the publication requirement for LLCs in New York is absurd and a significant barrier to entry for small businesses. I am currently looking at forming an LLC and would like to know whether it is possible to circumvent the exhorbitant fees incurred in New York county publication by obtaining a registered agent based in Albany county to act as the “office” of the LLC (as I understand Albany county fees are significantly cheaper). Does anyone know whether this is a possible route? My business is that of importing food products and I would be operating out of a home office based in New York County and a warehouse based in either New York County or somewhere in Jersey.
While the structure of a S-Corporation could appear to be more complicated, it is not. In fact, because the details of how a corporation works are fleshed out in the corporations code and in ironed out cases and laws, corporations are actually far easier to maintain and form than LLCs, which require fully customized Operating Agreements. While states such as California and New York potentially double tax S-Corporations to some extent, it is important to note that this is a net income tax, which can be managed by salary and other deductions (unlike the publication fee or California’s gross receipts fee which are carved in stone). Good news with respect to moving a LLCs principal place of business though — New York’s publication requirement applies only at the point of fcormation. The law clearly provides that amending the publication is not required after the initial publication is completed.
I’m a graphic designer who just moved to Brooklyn (Kings County) and I’m thinking about forming either an LLC or an S-Corp.
It sounds like the S-corp is far more complicated for what is essentially a sole-proprietorship and I’d much rather form an LLC but the publication cost is ridiculous. It should be noted, however that NY state doesn’t recognize the S-Corp filing status so you’ll be double-taxed at a rate of 8.35% (for state taxes, anyway), which could turn out to be more than the publication cost of an LLC, depending on how much business you do. At least, that’s what my research has turned up. Anyone have more comments about that?
Also,a question: if I initiate an LLC in Kings County and eventually move into Manhattan, will I have to go through this again for New York County publications?
My suggestion to all who are understandably frustrated with NY’s irrational LLC publication requirement is: consider other forms of doing business, most importantly the S-Corporation. In our firm, because of the way that New York and California have added junk fees to LLCs (but not other forms of doing business), we use the LLC as our entity of last resort. For the most part, S-Corporations are perfectly appropriate for most small businesses (unless, for example, the structure of the business requires special flexibilty not offered by rigid S-corporation rules, the owners of the company will be foreignors or other companies, etc.). Watch this video to learn more http://www.eminutesonline.com/should-i-form-an-llc/
Good luck with the Kings County Clerk office. If you live within an hour’s drive, it’s actually faster to go there in person than to try getting through on the phone. There are generally 2 people working and they may or may not answer the phone. There is of course no hurry – the jobs are secure. It takes about 30 seconds to get the newspaper requirements from them, but it has to be done in person or by mail
Take TWO copies of your receipt from the State that shows you’ve paid $200. The Clerk will stamp them and write down which 2 papers you need to use. They will keep one of your copies on file and give you the second. You CANNOT select your own 2 papers – all the wealth generated from these legal notices is supposed to be spread around Brooklyn. And it has nothing at all to do with the place in which your business will operate. So you may be required to advertise in the Tablet (the publication of the Catholic church), or the Canarsie Digest, or even more obscure little publications.
You publish for six weeks then get an affidavit from the newspaper that you mail up to the State with yet another fee.
You can get your publication requirement thru the mail but the turnaround is 10 days or so.
The entire process illustrates the worst aspects of government bureaucracy. Indifferent and unavailable employees, archaic requirements that exist simply for their own sake, a waste of time and money all around. The Soviet Union collapsed under this type of dead weight. Good luck Brooklyn.
Just called the county clerk to ask for a promo code, but they are only opened M-F 9-3:30.
This is absolutely nonsense! I mean the law! I would try to publish something online, in a real newspaper, but I am sure it will add 500 USD at least.
In the 21st century… with craiglist…grr
Does anyone know if there’s an email address for the Kings County Clerk’s Office? I’ve called the office three times now and no one is answering, not even a recording.
These fees are ridiculous. As the article above states, the information contained in these notices is ALREADY published on the web by the NY DOS. There is no purpose to these pubs other than to penalize those who choose to create an LLC. Corporations face no such publication charges, which is one reason why small biz owners often choose the corporate form over the LLC in New York state – its just plain cheaper to set up a new corp. than it is an LLC. I recently had to pay NYLJ a little over $800 and also pay something called “The Afro Times” (never heard of it, but it was specified by the NY County Clerk) close to an additional $600. And for what???
If this silly regulation must remain, there doesn’t seem to be any reason why a prospective LLC filer shouldn’t be able to just go to a web page and choose 2 publishers of their liking. Why not let these publications compete for our business instead of being allowed to continue to gouge us???
rediculous. fees, fees, fees. you would think the local govt would be encouraging new businesses during such a rough economic time….
Jeff,
Thanks for highlighting this craziness. I just got back my articles of publication from the NY law journal. $723.20 for the privilige of filing my articles of organization in Manhattan. This is a drop in the ocean for major corporations but it is a major barrier for or owners or small companies who simply want limited liability protection or a shell of a company that they can build from.
It should be high on bloomberg’sa agenda to lower this first barrier to setting up a new company in ny
To publish, the first step is to contact the County Clerk. The Clerk will review the Articles of Organization or Application for Registration, as applicable, and designate two newspapers in the County identified on the Articles. Should the Articles of Organization or Application for Registration contain any fraudulent information, pursuant to § 210 (1)(2)(b) of the New York Limited Liability Company law, the person who signs the Articles can be held liable to the correct County for the appropriate fees.
I’m running into this issue now… Does anyone know if there any limitation to which county I can file in? What stops me from filing in one of the upper counties when I live down state?
The requirement for publication is imposed by the New York Limited Liability Law on all domestic and foreign limited liability companies in New York. To publish in any New York County, you must contact the appropriate County Clerk’s Office. They will specify two newspapers of local circulation where the publication will take place. Make sure to obtain the contact information for each newspaper from the County Clerk’s official, as you will need to find out the specific requirements and fees imposed by each newspaper. You will also need a copy of the “Filer” received upon formation or qualification of your LLC from the New York Department of State. For Kings County, the contact information is as follows:
The Kings County Clerk
Supreme Court Building
360 Adams Street
Room 189
Brooklyn, NY 11201
(347) 404-9772
Does anyone know who to contact or a number for Kings Country to find out the list of pulications?
Great! Thank you Sir. My next question is how do I go about coordinating with the county clerks office. I assume I have to call and inform them that I would like to do this directly with them?
You are only required to publish a copy of the articles or notice of formation of an LLC in the borough where the principal place of business is located. You do not have to publish in all boroughs. If your principal place of business is in Manhattan, you must publish in New York County, if your principal place of business is in Brooklyn, you must publish in Kings County, etc.
If you coordinate directly with the county clerk’s office, you will not be paying the service premium that publications companies charge so it will be slightly cheaper. However, the actual publication fees will be the same. To get the names of the two designated publications for your LLC, you need to call the county clerk’s office in the county where the company’s principal place of business is located.
How can I publish Articles of Organization myself, without using publishing companies in the Tri state area? I want to publish in the 5 boroughs. Are the fee’s to publish directly with the newspapers designated by the county clerk as expensive as using a publishing company for NYC 5 borough publishing rates?
Although both California and New York include simply maintaining a bank account on their list of safe harbors, as a practical matter, opening a bank account still tends to require a qualification. Thanks to the Patriot Act, most banks will require a qualification before they will open a bank account for a foreign corporation. See, http://www.eminutesonline.com/it%e2%80%99s-un-patriot-act-ic-california-banks-impose-burden-on-corporations-seeking-to-open-accounts-that-conflicts-with-language-and-spirit-of-patriot-act-and-its-implementing-regulations/
The telephone number for the County Clerk in New York County is (646) 386-5956
New York Limited Liability Company law requires all LLCs to publish a copy of the Articles of Organization or a notice related to the formation of the LLC in two newspapers within 120 days after the effectiveness of the initial Articles of Organization or application for authority (in the case of a foreign LLC doing business in NY). 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. To get the name and contact information for the designated publications in New York County, you must contact the County Clerk’s office by phone. The telephone number is (646) 386-5956.
According to the New York Division of Corporations website, merely opening a bank account is specifically excluded from what constitutes “doing business in NY”
Hi, I need to publish the notice for my LLC in New York County /Manhattan(very unfortunately to be the most expensive area). I understand I must use designated newspaper by county cleck. Then, where can I get the information or the list of those designated newspapers in New York County? If no information online, do I have to go the clerk office? Thanks.
Do you know how to get in contact with the NY County Clerk to find out which newspapers they will designate me to?
Unfortunately, the publications are designated by the county clerk of the county in which the office of the LLC is located, as stated in the articles of organization. You will not have the option to choose one publication over another. However, publications fee are generally less expensive outside of New York and Westchester counties.
Do you know of any publications in Kings County who charge lesser fees?
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.
Thanks for speaking out on this absurd boondoggle. I live/work in NYC and just formed my LLC in Delaware, but even as a foreign LLC I still have to deal with this nonsense. Who knew NY was so anti small business? The thing is, as an NY resident and taxpayer who transacts business on the web, it doesn’t seem like I really need any special authority to “do business” in NY. The only reason I registered with NY at all was so that I could open a bank account for my business, but now that that’s done is there any reason not to just ignore the publication requirement?