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8 • 2010

New York’s Burdensome LLC Publication Requirement: Relief May be on the Horizon

This article has been updated here: All You Need to Know About New York’s LLC Publication Requirement

Commentators widely agree that New York’s LLC publication requirement hurts both small businesses and the state itself. It hurts small businesses by increasing the startup costs for businesses that can benefit from the flexible management structure that an LLC can provide. It hurts the state because the existence of the onerous publication requirement has led to fewer LLCs being formed per capita in New York than in comparable states (such as Delaware, New Jersey, Nevada and Connecticut). As a result, New York State has lost out on the filing fees that accompany new business formation.

Thankfully, relief may be on the horizon.

In February 2009, a bill repealing the publication requirement was introduced in the New York legislature (S1667/A4496). In the memo accompanying the bill, the sponsors explain:

The intent of the Legislature when enacting the LLCL in 1994 was to allow businesses to enjoy the advantages of incorporation, without requiring them to adopt the organizational constraints of the business corporation law. This is particularly useful for small businesses. §206 of the LLCL requires that after the articles of organization have been filed, the LLC must publish a copy of the articles or a notice of their substance, once a week, for six consecutive weeks, in two newspapers from the county where the LLC is located. The LLC is then required to file affidavits of publication within 120 days and pay an additional fee of $50.00. These requirements are both unnecessary and very expensive sometimes prohibitively so. Also, there are no similar requirements in the Business Corporation Law. The transparency that publishing this information allows can be better achieved today through the internet. Indeed, the Department of State already maintains an excellent publicly-accessible online database. It is extraordinarily difficult to find this published information when or after it appears in print in a daily or weekly local print publication . . .

To improve access to LLC information, the bill also requires that department of state promulgate rules and regulations for the on-line filing of articles and certificates, and establishes a fee of $50.00 for the on-line filing of documents with the department of state. This filing fee is much more reasonable than the cost of publication in the least costly county. Moreover, the fee will be the same regardless of where the LLC is located. The fee will help fill the state’s coffers, not those of private media interests such as the huge Incisive Media (publisher of the New York Law Journal, which is one of the papers designated for publication in New York County).

Currently, the bill is stuck in the legislature’s corporations, authorities and commissions committee. With more pressing matters to deal with—New York’s budget is currently more than three months overdue—it’s unclear when S1667/A4496 will make it back to the Senate and Assembly floors. To help encourage the legislature to act on S1667/A4496, we encourage you to sign the “Why 2K?” petition, which you can find here.