In New York, LLCs are the most common corporate form for real estate. This is due to the ease with which a limited liability corporation (LLC) may be formed and operated.
If your real estate firm is sued, an LLC may safeguard your personal assets (vehicle, home, money). LLCs also provide credibility and tax-saving possibilities.
It Is Simple to Form a Real Estate LLC in New York.
In New York, you may form a real estate LLC by filing the Articles of Organization with the New York Department of State. In New York, forming a real estate LLC costs $200.
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Step 1: Give Your Real Estate LLC a Name
The first step in organizing a real estate LLC is to choose a firm name. You must offer your company a distinct name that complies with New York naming regulations.
When you submit your Articles of Organization, you will formally register your name.
Choose a name that complies with New York naming regulations:
The word “limited liability corporation” or one of its acronyms must be in your name (LLC or L.L.C.)
Your LLC’s name cannot include terms that imply it is associated with a government entity (FBI, Treasury, State Department, etc.)
In New York, see whether the name is available. Make sure the company name you choose isn’t currently in use by doing an online LLC name search.
Examine if your company’s name is accessible as a web domain. You may choose to purchase the URL in order to prevent others from using it.
Step 2: Select a Registered Agent for your LLC.
By default, the Secretary of State functions as the registered agent for all New York LLCs.
The role of a registered agent is to receive legal papers such as service of process and tax notifications on behalf of your LLC.
The Secretary of State will send the following to the primary address of your LLC or the address of your chosen registered agent:
All formation paperwork
Any process information service
Taxation and reporting documentation
You may choose someone other than the Secretary of State to serve as the registered agent for your New York LLC, such as a person or a registered agent service. Although you may serve as your own registered agent, many company owners choose to employ a registered agent service.
Consider the following while selecting a registered agent:
Availability: You must be accessible during regular business hours (Monday through Friday, 9 a.m. to 5 p.m.) at the address you indicate.
Public Documents: If you conduct your company from home, you must make your home address public.
Privacy: A lawsuit might be served on you in front of your family or workplace.
Even if you employ a registered agent service, the Secretary of State will still be the initial point of contact for the state and anybody who may serve legal action on your LLC.
Step 3: File the Articles of Organization for your LLC.
You must complete Form 1336-f – Articles of Organization with the New York Secretary of State to register your New York LLC. This may be done through email, mail, fax, or in person.
Consider incorporating your real estate LLC as a S Corp. As an IRS tax classification, a S corp may give certain tax advantages to your real estate firm.
Step 4: Comply with the New York LLC Publication Requirements.
Within 120 days of establishment, all LLCs must publish a copy of their Articles of Organization or a notification connected to the formation of the LLC in two newspapers (one weekly and one daily).
The local county clerk of the county you specify in your Articles of Organization must authorize the publications. Following publication, each newspaper’s printer or publisher will supply you with an affidavit of publication.
You must send your Certificate of Publication to the New York Department of State along with your publication affidavits.
Step 5: Draft an Operating Agreement for a Real Estate LLC.
An LLC operating agreement is a legal document that defines your real estate LLC’s ownership and member responsibilities. An operating agreement is required for all New York LLCs.
An operating agreement may benefit even single-member LLCs.
Your operating agreement should include the following provisions:
Responsibilities of each member
How will new members be admitted?
How may current members transfer or cancel their membership?
How will earnings and dividends be distributed?
When and how will capital calls be made?
Manager liability for errors made in good faith
Tax and reporting deadlines
Members have first right of refusal and interest transfer if the property is sold.
Step 6: Obtain an EIN
The US Internal Revenue Service (IRS) uses an Employer Identification Number (EIN) to identify and tax firms. It’s essentially a business’s Social Security number.
Following the Formation of a Real Estate LLC
Following the formation of your real estate LLC, you must perform the following:
Establish a Business Bank Account. Personal and corporate money are legally separated via a business bank account. This separation is essential to keep your LLC’s corporate veil intact (i.e., your limited liability protection).
Transfer Existing Real Estate to Your New LLC If you already possess property that you want to transfer to your new LLC, you must register a deed reflecting this change. This may be done with or without the assistance of a title firm. To begin started, we suggest contacting a title business or your county clerk.
You should update your lease. If you are transferring existing rental property to a new LLC, your residential lease agreement must be updated to reflect the new ownership.
Fill up and submit your New York LLC Biennial Statement. Every two years, file with the New York Department of State by the end of the month in which the LLC was created. Reports do not have to be submitted the same year an LLC is created.