Can you reduce New York LLC publication fee by using a registered agent?


1

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.

Situation

  • Company business will be publishing mobile apps - iOS & Android
  • 1 person company - no employees
  • Will not be seeking investment or partners
  • Lives in New York City (Brooklyn)
  • Will be writing the software in New York City

Why I've chosen LLC

  • Not having to publish under my own name in iOS store
  • Liability protection afforded to me by LLC (realize this is a small risk in app publishing, but I'm risk adverse)
  • Appears to have the least paperwork for any legal entity providing me with limited liablility
My research shows To setup an LLC in New York (as single member LLC) I need to:
  • Pick a name not in use for LLC
  • File articles of organization + operating agreement (online) - $200
  • Publish in 2 news papers, one daily, one weekly (desigated by the County Clerk) for 6 weeks in the county where business will be (in my case Brooklyn/Kings County) - approx. $1,000 - $2,000
  • File Certificate of publication (received from newspapers) after 6 weeks - $50
Questions Can I file out of state and avoid filing as a "foreign LLC" in New York to avoid publication fee?

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:

http://public.leginfo.state.ny.us/LAWSSEAF.cgi?QUERYTYPE=LAWS+&QUERYDATA= $$LLC206$$@TXLLC0206

I've reached out to NYC small business service to see if I can get an answer as well.

LLC New York Mobile Apps

asked Aug 30 '12 at 03:42
Blank
Drc
118 points
  • This publication requirement in NY is a significant roadblock to businesses. I suspect the newspapers have strong ties to the law makers which allow this nonsense to perpetuate. I've created S corps to avoid the expense of the LLC. – Tim J 7 years ago
  • Nobody enforces it in NY, as far as I've seen. And if you read about the consequences in the books, the impact isn't substantial. If you're ever in a position where your company has to sue (and your LLC by default loses the ability to sue because it hasn't published), you can always publish at that point in time to restore full LLC rights. This is just my eval of the situation based on experience (see my post below for the article discussing this). It is not legal advice. – Henry The Hengineer 7 years ago

4 Answers


1

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.

answered Aug 30 '12 at 04:19
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Littleadv
5,090 points
  • Thanks, great answer. I did not intentionally try to differentiate between "business will be" and "office". But you've made it clearer that there is a difference there and tied it back to the law as written as well, good stuff. – Drc 7 years ago
  • Do you have any recommendations on small business lawyers that deal with LLC and mobile apps and software. – Drc 7 years ago
  • no, sorry, I don't. But a simple question as this you can ask a LegalZoom lawyer for ~$25. – Littleadv 7 years ago
  • I see this blog by a lawyer seems to think this is perfectly legal: http://www.newyorksmallbusinesslaw.com/new_york_small_business_l/2007/01/taking_care_of_.htmlDrc 7 years ago
  • The statute does not have any preemptive enforcing power. It is only reactive enforcement in the case of a lawsuit that YOUR LLC attempts to initiate. Even then you can restore full rights by completing the publication at the time of the suit (see post below). Imho from a business perspective, that $1000-$2000 is better spent building up your startup than it is going towards something that has no empirical consequence. – Henry The Hengineer 7 years ago
  • @HenrytheHengineer I understand your point and it does have merit. I would not suggest, however, to someone to break the law voluntarily. The problem is that laws may change, and while not criminalized/penalized now, it may become later, and if the change is missed and overlooked, being non-complaint may become a problem. The trick with organizing in a different county sounds much safer to me, as its legal consequences are here and now, and no longer dependent on subsequent changes of the law. – Littleadv 7 years ago
  • There is no "breaking the law" in the case of publication because there are no criminal law consequences (losing the power to sue with a business entity temporarily is not criminal conduct). If the state wanted to enforce this requirement, it should have passed it as tax law, not as some DoS decree. Since there are no tax implications involved in the publication itself, the situation is very similar to refusing to buy a service from the government that isn't required from a tax law standpoint. It's extremely unlikely this issue can be criminalized any time soon without Constitutional inquiry. – Henry The Hengineer 7 years ago

1

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.

http://www.eminutesonline.com/what-happens-if-you-ignore-new-york%E2%80%99s-llc-publication-requirement/

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.

answered Aug 30 '12 at 08:16
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Henry The Hengineer
4,316 points

0

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.

answered Mar 7 '13 at 01:13
Blank
A Guy Who Forms Nys Ll Cs Often
1 point

-2

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.

answered Aug 30 '12 at 08:03
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Cqm
137 points
  • It won't help since the OP will have to qualify in New York anyway, you'll just be adding more red-tape and fees over what's there already. Generally, it is not a good idea to form the LLC in a jurisdiction other than where the business is actually conducted. – Littleadv 7 years ago
  • Having the LLC not in good standing is an option for a NY LLC just as well, its just why file LLC then? You won't have the liability protection if the LLC is not in good standing. – Littleadv 7 years ago
  • OP can create better liability protection by filing in a different state – Cqm 7 years ago
  • @littleadv if his LLC is formed in any other jurisidction, it will be in good standing with that jurisdiction. which is all that matters, there is no record of the LLC in NY – Cqm 7 years ago
  • Not in New York. In that other state, may be. But the OP is unfortunately domiciled in New York. An alternative would be to incorporate, but that has other issues that the OP might want to avoid. What you suggested ("ignore the state") is basically breaking the state law, which is never a good thing. – Littleadv 7 years ago
  • @littleadv it doesn't matter that he is domiciled in New York. The LLC is its own entity and even the registered agent may let you use their address for the LLC's "domicile" – Cqm 7 years ago
  • @littleadv if his LLC owned property in new york it would make a difference. he is doing tech stuff only, intangibles, keep it on the net – Cqm 7 years ago
  • it does matter when you get sued. If the OP is sued in New York for something he did in New York, the fact that he has a LLC elsewhere is irrelevant, because the LLC wasn't qualified to act in New York, thus the OP has no liability protection. And that was the whole point of creating the LLC to begin with. – Littleadv 7 years ago
  • @littleadv nobody needs to know he is domiciled in new york. if anybody looks up the LLC they will see addresses in wyoming. all his contracts with clients should reflect that, or have a PO box. which cannot be served for court process in NY. – Cqm 7 years ago
  • But he **is** domiciled in New York. The operation is in New York, the performance of services is in New York, and the OP is in New York. That is the fact of the matter, and you **cannot** disguise it by filing the LLC in Wyoming, because claiming in the court in New York that it has no jurisdiction would be perjury. – Littleadv 7 years ago
  • @littleadv what Henry posted nullifies your argument. if he publishes at any point in the future, even after being sued, he gets limited liability protection. This decision is based on the *consequences* of noncompliance - which are negligible - not the concept of noncompliance in and of itself – Cqm 7 years ago
  • yes, but that was not what I was arguing. I was arguing that the publication is required even in your scenario, which you seem to be unable to comprehend. If the OP is in New York - he **has to** to do the publication, and the fact that he registers the LLC in Wyoming doesn't change that. So why bother? – Littleadv 7 years ago
  • no, and there is no consequence of not registering. his llc can enter into contracts, get paid, and if he has difficulty enforcing them he can get registered IF he needs to use NY courts as opposed to some other states court depending on where the client is – Cqm 7 years ago
  • Again, read my first comment to your answer. You just suggested adding **more** fees and **more** compliance requirements, not *instead* - *add*. Not just New York - **also** Wyoming. Why? Since we're in agreement now that even for a foreign LLC the publication is required, why would a NY resident want to do a foreign LLC, which he'll have to qualify in NY anyway? – Littleadv 7 years ago
  • how is this going over your head, I know what you said and I know that foreign llc's are "required" to register. I'm saying you don't because there is no consequence for not doing so, no, nadda, none, zip, zero filing fees for NY, henry even posted case law. cross the bridge if you ever get there – Cqm 7 years ago
  • CQM, I'm going to rock your world with this question and shock you completely, but still. I hope you won't suffer a heart attack. Now, to the question: If you're creating an LLC not to be in good standing in New York - why create it in Wyoming? Why not in New York? What benefit is there? You don't want to publish - don't publish. Henry's analysis is good for either domestic or foreign. If that's your claim - I still fail to see why paying fees to an **additional** state makes it any better, other than exposing you to a liability for non-compliance in NY. – Littleadv 7 years ago
  • @littleadv year 1 - pay $200 filing fees for wyoming , year 2 - pay $50 wyoming compliance, year 3 - pay $50 wyoming compliance, year 4 - need to sue client in NY, pay $50 wyoming complaince, $1600 NY publishing complaince, pay $200 certificate of authority complaince. This is how my way works, a lot cheaper. The limited liability of the entity itself will extend to all jurisdictions when the courts lean on the laws of the jurisidction it is created in – Cqm 7 years ago
  • Keep in mind, that Henry only addressed the court action eligibility. There are also fines and penalties for non compliance with the state requirements and may be also tax consequences. I'm not familiar with NY laws, that's why I suggested the OP to talk to a lawyer. But I am familiar enough to see that what you're suggesting is bluntly ignoring and breaking the law. I'm generally against that on principle. – Littleadv 7 years ago
  • @littleadv understandable, I am much more of a consequentialist than a deontologist . the only tax consequence is the publishing tax. the OP will pay NY state taxes as the LLC is a disregarded entity and all earnings will flow through to him – Cqm 7 years ago
  • $150/year savings for potential liability and legal penalty troubles? Man... Well, if you can't comprehend then you can't comprehend. I'm tired of the argument, I hope the OP is more intelligent than following some criminal suggestions. – Littleadv 7 years ago
  • littleadv, fines and penalties are listed clearly in NY law and there is no penalty for failure to publish. Tax penalties are enforced by the NY Franchise Tax Board, which is another government entity altogether that has no de jure authority to enforce NY DoS fees (furthermore NY DoS and the NY FTB have layers of bureaucracy between them that preclude de facto cross-enforcement). – Henry The Hengineer 7 years ago
  • @Henry how about failure to file? I know that in CA, a foreign entity acting without registration will be subject to penalties **and** the franchise tax. How is it in NY? – Littleadv 7 years ago
  • Technically, it is not failure to file a foreign registration that the NY Dept. of Taxation and Finance (DTF) is enforcing - it is enforcing tax liabilities associated with income derived from doing business in NY that is not reported on the state income tax return. It is entirely up to that gov't agency to determine tax liability and to enforce penalties. Here are some empirical scenarios: http://www.tax.ny.gov/press/rel/2012/enforcementweb041012.htmHenry The Hengineer 7 years ago
  • If the publication fee were a tax penalty or had back-tax interest consequences, then I would have a different opinion on publication. But since there is no real enforcement (an no direct criminal law implications), my opinion is as above. As for foreign registration, I would recommend following through with the process for liability protection in NY, though the more important consideration of doing business in a different state is to make sure you report the income you earn from doing business in that state to the state tax authority. Failure to pay tax DOES have criminal law implications. – Henry The Hengineer 7 years ago

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