What are the pros and cons of starting an LLC in New York?


The owners of LLCs, also known as members, enjoy the protection and flexibility associated with corporations, but also the simplicity and flexibility associated with partnerships. Because corporations are more rigid, LLCs tend to appeal to more potential businesses.


The LLC can share profits based on ownership interests. The shareholders of corporations share the profits. Administrative tasks for an LLC are easier than those of a corporation, as they don’t require shareholders meetings or detailed records. If you’re interested in learning more about the pros of and cons to starting an LLC, read on.

Start an LLC in New York State: Pros and Cons


Starting a business in New York State is easier with an LLC than a corporation.


One of the biggest benefits that LLCs offer is limited liability protection. Members of an LLC are owners and have no personal liability for debts or obligations of the company. If there is an issue in the business’s financial or legal realm, the assets of the owners, such as their homes and bank account, will be protected. As the LLC is responsible for all of its obligations, it provides owners with a layer of protection. Creditors cannot expect an LLC member to use their personal assets to pay off the LLC’s debts.


Ownership and management of LLCs are flexible. The management can be informal. Owners can choose how to run their company. Owners can choose to manage the company themselves or appoint managers. New York State allows LLCs to be managed by members. All members of an LLC can make decisions and manage the business. This can be an LLC managed by a manager. It occurs when designated managers are in charge of daily business operations. Forming an LLC that has a management system that suits your needs is much easier. In New York State an LLC can have a single member or multiple members.

The ability to pass-through taxes is a major advantage of LLCs. In New York LLCs are exempt from corporate income tax. Profits and losses are passed on to the members of an LLC. They then report these on their tax return. It allows tax savings, as there is no double taxation between the corporate and personal levels. It also simplifies tax filing. If the LLC is a single member LLC (also known as a one-member LLC), it can be taxed either as a sole proprietorship, C corporation or S corporation. If the LLC has more than two members, then it is taxed either as a partnership, C corporation or S corporation. It’s important to choose what is best for all members. A tax expert is often consulted for this purpose. If an LLC chooses to be taxed like a C-corporation, it is not allowed to pass on its profits. These LLCs could also be subjected to the New York franchise tax.

It’s easy to create an LLC in New York. The LLC must file a Article of Organization at the New York State Division of Corporations. A filing fee is required. An LLC’s ongoing requirements are simple. It’s easier to form and maintain an LLC than any other type of business structure. It’s difficult to create and maintain other business structures. To remain compliant, there are many steps to take.


Your business will appear more professional and credible if you have an LLC. After forming an LLC, it can be added to your company name to show your customers, suppliers, and partners that you’ve taken the necessary steps to create a formal business entity. This builds trust in your brand and could lead to more opportunities.

Cons of Starting an LLC In New York State


Although an LLC is the most common business entity, it may not be the best option for your company. An LLC has some disadvantages:

Even though the cost of forming an LLC is low, it still comes with fees and costs. New York State charges fees to file documents for formation. The LLC status is also maintained by annual fees. You may need to consult professionals such as accountants or attorneys depending on the complexity of your company. These consultations are not free.


Although LLCs do not have to pay corporate tax, their individual members must pay self-employment tax. Self-employed individuals must pay both employer and employee Medicare and Social Security tax. This could be a major financial burden for the LLC members.

You may discover that creating a multi-member company is more complex, particularly in terms of governance, decision making, and profit-sharing. This option can be flexible in certain ways but it can also cause conflict, especially if you are trying to get everyone to agree. To avoid any potential issues, it is important to create a multi-member company with clear operating agreements. It can be difficult to run a business smoothly when there are disagreements between members.


New York State may have different requirements and regulations than other states for LLCs. Understanding local laws and obligations is important. Included are items such as tax obligations, reporting requirements, and publication requirements. In New York State, LLCs must publish an announcement of formation within 120 days after formation. It also increases administrative steps and costs. To avoid legal issues, it’s best to consult a lawyer or professional advisor to ensure compliance.

Final Thoughts


There are many advantages to forming an LLC in New York State. The advantages of an LLC in New York State include limited liability protection, pass-through taxes, management flexibility, and increased credibility. There are other factors that you should consider such as fees, self-employment tax, and the complexity associated with a multi-membered LLC. New York State’s additional regulations may make people hesitate to create an LLC, but depending on the situation, this could be the best choice.

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