Setting up an LLC

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Thinking of setting up an LLC and what type of package to get? Here are some questions and answers parents have shared on the PSP Career Networking Group.

 Disclaimer:  This post has been written for educational purposes only and was not meant to be legal advice and should not be construed as legal advice or be relied upon. The post may contain errors, inaccuracies and/or omissions. You should always consult an attorney admitted to practice in your jurisdiction for specific advice.

Question

One parent asks...

I was wondering if anyone has set up an LLC through the Company Corporation and whether getting the "Premium Package" was worth it or if getting the "Basic" package with maybe "Obtaining EIN" al la carte is just fine.

The extras that are offered with the Premium Package are:

- Compliance organizer and corporate seal

- A 3 book legal and tax reference library

- Your LLC operating manual

- Additional 6 month registered agent

 Are any of the extras things that you felt were really helpful or necessary? Are some of these things easily available elsewhere for less money? If anyone has any of these extras and is perhaps even willing to let me come by to take a look at it, that would be helpful too.

Responses

"FYI, a New York LLC does not require a registered agent. You will need to publish the formation though. Publication costs can be very high but there are ways to reduce them. You can file for your own EIN in two minutes using the IRS's website.

If you are creating a company with other Members (i.e. your partners) be very careful of using the form operating agreement that would be provided to you as part of this "Premium Package". The heart of an LLC is the operating agreement. It sets out every Members' rights and responsibilities as well as general operating procedures of the company. I can't stress enough that if there are multiple Members, you ought to retain a startup attorney to draft an operating agreement."

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"I agree with what [above poster] says. I would also add that, as [the above poster] noted, the publication costs for forming an LLC in New York can be very expensive. Consequently, you may wish to consider if you have a basis for making the original place of business of your company a county that is not in New York City. For example, if you have a home in Suffolk County or Westchester you can save yourself hundreds of dollars. If that is not feasible, you should look at what Company Corporation charges you for the entire package, whether basic or premium. Although you do not need some of the services, if the total cost is below $750 or so, you might still be well-served to use them. I say this because the publication costs alone (ignoring the filing fees NY state levies) can be that much or more, particularly if you have to use New York County or Kings County, but these services often have negotiated rates with the periodicals in which you have to publish the notices that are much better than what you can get on your own. So I would look at how much Company Corporation is charging and also do a bit of comparison shopping -- try CT Corporation and/or CSC Corp, which both perform similar services, are generally flexible in terms of providing you with only what you need or want and have well-established reputations in the legal community."

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"Not worth it. Keep your stuff in a file and if you ever have questions, ask a lawyer."

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"It is very unlikely that you will need any of the premium items.  You also can apply for the EIN number online on the IRS website for free. You will need an operating agreement - it is the company rules.  You can find plenty of samples online or from NOLO press if you just want a very basic one.  However, I will mention that I do not recommend filing for an LLC in NY.  There is an antiquated publication requirement which will cost you an additional $900-1200.

Instead if you want the pass thru taxes of an LLC you file for a corporation in NY then you file for an EIN number and complete form 2553 to elect S corporation status.  The only corporate maintenance difference is a corporation is required to maintain in its offices annual minutes of the meeting of the Board (which can just be you) detailing any corporate issues.  An LLC doesn't have to have meetings unless it says so in the operation agreement.

 

The important thing to remember is maintenance of minutes is only ever challenged if you are in a lawsuit and the party suing the company wants to sue for more money than the company has and they want to reach your personal assets.

 

Remember the main reason you start a corporation or LLC is to protect your personal assets from debts of the company.  If you fail to publish the LLC properly, do not have minutes for the company to produce during litigation, commingle personal and company assets, and many thee things, a court can determine that you no longer are entitled to the protection of your personal assets (its called the corporate veil).

 

This is NOT a legal opinion because many factors dictate these decisions, this is simply business advice.  However, I will say that this is why it is better to spend $500-$1000 to have a lawyer file your documents than a filing service like company corporation or legal zoom."

 

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"I just formed my own LLC for my own law practice.There are excellent sources online of the forms you will need to complete, and the procedures you will need to follow, including on the New York Department of State's website.

The only special item I needed for the formation of the LLC was a copy of my good standing as a lawyer. This might apply to you if your LLC is going to engage in a field that involves a license. As far as the publication requirement that applies to the New York LLCs, I went to the Kings County Clerk's office on my own to get the information on where to publish. The two publications that I was assigned ended up charging me $660 in total, though this will depend on which publications you are assigned. I did not see any need to pay a service for this.

The only aspect of the formation that I think you would want a lawyer for is to prepare the Operating Agreement for the LLC. I prepared mine myself but I am a lawyer and I definitely would not recommend that a non-lawyer do this on his or her own.

 

This does not constitute legal advice."

Useful Resources

Forming an LLC in the State of New York (governement website)

PSP Recommendations for Legal Help

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