Why do I Have to Publish my LLC?
Many entrepreneurial hopefuls, when filing their Articles of Organization with the State of New York, are only vaguely aware of the publishing requirement associated with their filing, if at all. Then, suddenly, they are inundated with mailings from service companies, accounting and legal firms all offering services to complete paperwork that a new business owner has never heard of. So, what is the New York LLC publishing anyway?
What New York Limited Liability Company Law §206 Says:
Within 120 days after the date of filing, the New York Department of State requires that all newly formed limited liability companies, limited partnerships and limited liability partnerships publish a legal notice in one daily and one weekly newspaper in the county of the principal office of the company. The notice must be run once a week for six consecutive weeks and the newspapers must be designated by the county clerk.
The notice must contain: 1) the name of the entity; 2) the date of filing; 3) the county where located; 4) the name and address of the registered agent for service of process; 5) the date of dissolution, if specified in the Articles of Organization; 6) the business purpose of the company.
Once the notice has completed its six-week run, the newspapers will provide notarized affidavits attesting to the completion. These affidavits must be filed with the New York Department of State along with the Certificate of Publication form and applicable filing fee. Upon filing, the Department of State will issue a filing receipt showing that you successfully completed the publishing.
The Purpose of the LLC Publishing Requirement:
The publishing statute predates the advent of the internet and, historically, was created to inform the general public that a business entity was formed under a corporate structure that shields its owners from personal liability, debts and obligations. Consequently, the LLC would lose standing to bring a lawsuit in New York.
Nowadays, of course, this information is readily available simply by logging onto the Department of State’s webpage, a fact which many cite in protest of the statute. In a 2006 letter to the then-governor George Pataki, the New York County Lawyer’s Association urged the repeal of the requirement stating: “We ask that the legislative and executive branches of the State of New York recognize that New York’s laws imposing disclosure on limited liability entities via publication in print media have become outdated and unnecessary. Any purported protection the Publication Requirements may provide to New York consumers is already provided to them through the information available to the public on the website maintained by the New York Department of State of the State of New York.”
It is unclear why the State of New York preserves the requirement, though many suspect that it maintained for the financial benefit of both the State and the newspapers running the notices. According to attorney, Steven Masur, Esq., “the publication requirement forces an LLC choosing to do business in New York to pay what amounts to a state mandated formation tax to a private print publication.”
In an article submitted to the New York Real Property Law Journal, Joshua Stein agrees. “In nearly every state except New York, anyone can form a limited liability company (an “LLC”) by just filing a piece of paper with a state official and paying a small fee. Only New York and a tiny handful of other states require LLC’s to take a further step: they must publish in a newspaper an official notice of formation.”
What Happens if the LLC is not Published:
“If within one hundred twenty days after its formation, proof of such publication, consisting of the certificate of publication of the limited liability company with the affidavits of publication of the newspapers annexed thereto has not been filed with the Department of State, the authority of such limited liability company to carry on, conduct or transact any business in this state shall be suspended, effective as of the expiration of such one hundred twenty day period.”
Currently there is no penalty for entities in “suspended” status. According to representatives at the Department of State, the legislature may, in the future, impose a penalty fee for late Certificate of Publication filings to reinstate companies in suspended status. However, such a penalty does not currently exist.
Masur advises, “As long as the publication requirement for LLCs exists in New York, responsible attorneys should counsel their clients to either form a corporation, or when forming an LLC, to comply with the publication requirement in order maintain good standing within New York.”
Though the rationale for maintaining the publishing requirement seems loose at best, the fact remains that the State of New York not only continues to keep the statute, but is working towards stricter enforcement of companies fulfilling the obligation. A variety of service companies are available to assist you with completing this paperwork so that you can continue transacting business within full compliance of New York State law.
By: Leslie J. Martin