I have a question around creating a LLC in New York City , it's centered around the publication requirement of LLC's in New York state. This publication requirement means if your LLC is registered in New York City you pay approx. $1,000-$2,000 in fees to newspapers.
The key question is can I use a registered agent to meet the publication requirement in a location outside the city of new york but in New York state thus avoiding the higher newspaper fees of New York city. Then change the address to "real address" of the business to the location in New York city.
Why I've chosen LLC
As I will not have a physical presences, in the sense of having a physical store front in New York city, but as a single member I will be creating the software in New York City at my home, do I have to register as an LLC in New York?
Can I publish in newspapers outside of New York City, but in New York state, using a registered agent and then change the address?
I'm looking to use this service: http://www.northwestregisteredagent.com/new-york-llc-publication.html Is this approach legitimate? Has anyone else used this service?
There doesn't appear to be any rule in the law around publishing that says you have to republish if you change address:
I've reached out to NYC small business service to see if I can get an answer as well.
Sounds shady, but it might technically be legit. I'm relying on the Northwest interpretation here, but they say that you have to publish in the county where the principle office is. You said it should be the county where the business is being conducted. As you see, the difference in these two statements is the basis on which the legitimacy of the trick lies.
If its the county where the principle office is, then what they do is form the LLC in the Albany county, using their own offices as your principle office for the formation. Then, after publication in the local newspaper and successfully filing the LLC, you "move" - change the principle office to wherever you want it to be. I'm not a lawyer (and you should ask one), but it looks like utilizing a loop-hole, not breaking a law.
If its the county where the business is to be conducted, then the loop-hole is no longer a loop-hole, but an outright fraud. Since the business is to be conducted in Kings county, you must, with this interpretation, publish in Kings county.
The statute :
shall be published once in each week for six successive weeks, in
two newspapers of the county in which the office of the limited
liability company is located
So you should ask a NYC lawyer what of the interpretations is the right one: yours, or Northwest's. If its yours - then you shouldn't do that trick. To me it looks like you got it wrong, and they got it right.
I've used Northwest for my CA LLC, and generally they seem to know what's they're doing, but I would verify with a lawyer whether you can do this trick or not. The responsibility, in the end, is yours.
The consequence of not publishing/violating publication rules is discussed in the article below. The impact of not publishing is negligible for most tech startups such as yours. If you ask yourself who's enforcing this requirement and how it could be enforced, you'll see it's a bureaucratic nightmare for the NY DoS. NY DoS doesn't even have direct authority over the County clerks.
Your LLC does not lose limited liability protection for failure to publish. The only substantial consequence to failing to publish your LLC formation is that your LLC loses the power to sue another party in court, and this power can be restored when you do decide to publish. Most startups hardly ever have a reason to sue another entity, and when/if you have to cross that bridge, you can always choose to complete the publication.
This is only my personal evaluation based on caselaw/historical observations on this matter. It is not legal advice, and should not be considered as such.
In re Equities Capital Corp., is recent bankruptcy case involving the
publication requirement. In that case, a foreign LLC (which is subject
to publication requirements that are nearly identical to those
applicable to New York LLCs) sought to retain a contract deposit after
the debtor (Equities Capital) failed to close on a transaction
involving an option contract. The debtor argued that the foreign
LLC—which did not fulfill the publication requirement within 120 days
of qualifying to do business in New York—couldn’t recover for breach
of the option contract because: (1) it didn’t have the authority to
enter into the option contract in the first place; and (2) therefore
couldn’t sue to keep the deposit. The court rejected the debtor’s
argument on two grounds. First, the court noted that §802 of the
Limited Liability Company Law (which is substantially identical to
§206) explicitly says that the failure to comply with the publication
requirement “shall not limit or impair the validity of any contract or
act of such . . . limited liability company, or any right or remedy or
any other party under or by virtue of any contract, act or omission of
such . . . limited liability company.” Second, the court pointed out
that, under the same statute, when an LLC files documentation of its
substantial compliance with the publication requirement, the previous
suspension of its authority to do business in New York is annulled.
Since the debtor complied with the publication requirement after the
litigation over the deposit commenced, the suspension was revoked,
retroactive to the date the LLC started doing business in New York; in
other words, it was as if the suspension had never happened. A handful
of New York state courts have been faced with similar arguments in
cases involving New York LLCs, and all have reached the same
conclusion. Thus, an LLC that wishes to enforce a contract doesn’t
even have to wait until publication is complete to sue for breach of
contract: it can cure its failure to publish even after it files a
lawsuit. So, while we can’t advise you to ignore the law, we can tell
you that our legal research hasn’t revealed a single case in which an
LLC suffered any negative consequences because it failed to comply
with the New York LLC publication requirement.
Everyone here seems to be operating on old information. Yes, in the past, the only consequence of not filing was the possibility you would be forbidden to initiate an action in a NYS court, though you could still defend one brought against you. Used to be that you could simply publish after the fact and restore your ability to initiate an action if you so desired.
BUT... a couple of years ago there was a case in which an LCC owner took NYS to court on the basis that this publishing requirement was somehow unfair/illegal. She lost the case. And as a result the law on the publishing requirement was changed significantly. They extended the time allowed to publish, but more to the point, increased the penalties for not publishing significantly. Now, if you don't publish, your LLC can be suspended and its right to do business in NYS revoked. This is a significantly more onerous penalty. To the best of my knowledge this provision has yet to be enforced, and the chances may be slim of it ever being enforced, but if it is - your business is dead in the water.
Not worth it, in my opinion - just pay the publishing fee until saner heads prevail one day and remove this stupid uncompetitive mandate.
All this is my opinion, I am not a CPA or attorney. Check with yours before making a decision either way.
my suggestion: form the LLC in a friendlier jurisdiction.
like Wyoming. it costs $100 only, and you can find a registered agent to do it free for a year (and then $99 after that.) the annual state requirements are $50 only. This literally only takes 3 days. Wyoming levies no income tax but you will ultimately pay that in NY anyway since your LLC is a pass through entity.
the NY publishing racket only applies once your LLC owns property in the state, not does business in the state. Even if this is open to interpretation the consequences are moot, your LLC simply won't be "in good standing" with the state, in which case you can publish and get that status fixed anytime in the future. who checks this? banks.... mayyyybbbee. and they certainly do not care if your llc is in a different jurisdiction, you get the bank account, clients can send you money, you can sign up to all the app stores you want, get paid, ignore the state.
along with NY publishing racket, you will need to get a $200 certificate of authority which may be annual. If you don't get both of these things, your LLC will not have access to NY State Courts, so lets say you needed to sue someone to collect you wouldn't be able to do it in NY under your LLC's name.
most other jurisdictions are friendlier in this regard.