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20 • 2008

New York’s Irrational LLC Publication Requirements Hurt Business Owners and Benefit Special Interests

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

In New York, a Limited Liability Company must publish, within 120 days of its formation, a notice in two general-circulation newspapers (one daily, one weekly) in the county where the LLC was formed. The notice has to run once a week for six weeks and include a number of facts concerning the company and its formation. If an LLC doesn’t fulfill the publication requirements, the company’s authority to do business in New York can be suspended.

The costs of publication vary widely from county to county, ranging from around $300 in some counties to over $1,600 in New York County (Manhattan). Generally, publication costs are higher “downstate” (the five boroughs of New York City, Westchester County and Nassau and Suffolk Counties on Long Island). Publication costs depend entirely on the advertising rates charged by the newspapers that are designated by each county clerk for publication.

The irrationality of the publication requirement is illustrated by the role of one designated newspaper: the New York Law Journal. If your LLC is located in New York County, your notice must be published in the NYLJ and one other paper that is chosen at random by the New York County Clerk’s office. The NYLJ is a designated paper in other counties as well (though those counties at least give you a choice among daily papers).Why the NYLJ is considered a “general circulation” newspaper is a mystery: while it carries a number of different types of legal notices, it’s mainly read by lawyers.

Purportedly, the publication requirement is intended to let members of the public know who they are doing business with. Frankly, I don’t know any member of the general public—or even any businessperson who is not also a lawyer—who reads the legal notices in the newspaper. And anyone who is really interested in finding out more about any particular LLC can easily find this information, at no cost, at the New York Secretary of State’s website.

Since the publication requirement is antithetical to New York’s general public policy of encouraging robust commercial activity in the state, what explains the law’s existence? The answer is special interest politics. As then-Attorney General Eliot Spitzer observed in his official Memorandum to Governor Cuomo:

As you might expect, there was strong lobbying in favor of the publication requirement from a number of representatives of New York media. While those who supported publication did so on the alleged argument that it would increase public knowledge, it was my belief at the time that the publication requirement was solely an attempt to preserve a benefit for certain publications that derived considerable income from the publication of partnership notices. However, it was also my view at the time that it would be difficult if not impossible for the bill to pass without a publication requirement because of the support that media interests generated among legislators.

Because of the costs imposed by the publication requirement, business owners should think twice before forming an LLC in New York, particularly in the downstate counties.