NEW YORK
A TAX EXEMPTION ALTERNATIVE
FOR NON US RESIDENTS

LIMITED LIABILITY COMPANY
NEW YOUR LLC FORMATION

USA LIMITED LIABILITY COMPANY (LLC) INFORMATION

OVERVIEW
The United States LLC is not a partnership or a corporation. It is a distinct business entity that offers an alternative to partnerships and corporations by combining the corporate advantages of limited liability with the partnership advantage of pass-through taxation.

US LLC’s with non-resident members and which conduct no business in the US and which have no US-source income are not subject to US federal income tax and are not required to file a US income tax return. US LLC’s are popular vehicles for conducting international business.

KEY CORPORATE FEATURES

LLC INFORMATION

PROCEDURE TO FORM
Filing of Articles of Organisation or Certificate of Formation with the Secretary of State in the preferred state of formation.

LANGUAGE OF LEGALIZATION AND CORPORATE DOCUMENTS
English. If any other language is used it must be accompanied by a translation in English

REGISTERED OFFICE REQUIRED
Yes. Must be maintained in state of incorporation/formation at the office of a professional registered agent

SHELF COMPANIES AVAILABLE
Yes, for recommended states

NAME RESTRICTIONS
Anything identical or similar to an existing company within the state of formation.
Additionally, the use of bank, trust, insurance or reinsurance within the name of the LLC is generally prohibited in all 50 states. This is because limited liability companies in most states are simply not allowed to engage in a banking or insurance business.

LANGUAGE OF NAME
The name can be in any language. Some recommended states require an English translation.

SUFFIXES TO DENOTE CORPORATION
Limited Liability Company and Limited Company or their abbreviations LLC or LC

TIME TO INCORPORATE/FORM
Generally 2 days, but must allow an additional 5 - 7 business days for delivery of documentation.

COMPLIANCE
US FEDERAL TAXATION
US Limited Liability companies structured for partnership tax treatment with non-resident members and which conduct no business in the US and which have no US-source income are not subject to US federal income tax and are not required to file a US income tax return.

STATE TAXATION
US limited liability companies that conduct no business in the recommended states of formation with non-resident members are generally not subject to state income tax and are not required to file a state income tax return.

ANNUAL REPORT – LICENSE FEES
Of the states recommended, there is either a minimum or a 'flat' annual report or licence fee.

** The report is filed every two years. If an LLC is formed prior to June 16 in any given year, it's first Two-Year Report is due June 16 that same year. It's next Two-Year Report will not be due for another 2 years.

If an LLC is formed after June 16 in a given year, its first Two-Year Report will be due June 16 the following year. Again, its next Two-Year Report will not be due for another 2 years.

FINANCIAL STATEMENTS
There is generally no requirement to file financial statements with the state of formation unless the corporation owns assets within that state or has conducted business within that state.

DIRECTORS/MANAGERS
Normally one.

SHAREHOLDERS/MEMBERS
Normally one.

FORMING NEW YORK LIMITED LIABILITY COMPANIES
FURTHER DETAILS AND FEATURES

New York LLC is a recognized form of corporate organization especially useful to business developers and entrepreneurs like you. By electing a New York LLC, you pick a corporate form that's recognized by all fifty states, plus your New York LLC establishes a legal presence for your business in New York State. Advantages In Raising Investor Capital. A New York LLC offers key advantages in the area of raising capital and ownership. Unlike a Subchapter S corporate form which is limited to 75 shareholders, your New York LLC can raise required capital through private placement financings with an unlimited number of private investor-members (which can include persons, trusts, pensions or even other LLC corporation entities).

Incorporation in New York is a fairly easy process but the number of legal issues to consider can make the execution of each stage in the process extremely complex.

Every business owner should incorporate their business, since there are more advantages then drawbacks. Incorporating your company is certainly a good answer to protect yourself from those business lawsuits that come around so often.

LIMITED LIABILITY COMPANY – LLC
The LLC is a relatively new type of hybrid business structure that is now permissible in most states. It is designed to provide the limited liability features of a corporation and the tax efficiencies and operational flexibility of a partnership.

Formation is more complex and formal than that of a general partnership. The owners are members, and the duration of the LLC is usually determined when the organization papers are filed. The time limit can be continued if desired by a vote of the members at the time of expiration.

10 BASICS TO FORM A NEW YORK LLC
1. Minimum Number of Incorporators - One or more.
2. Eligibility Requirements - None.
3. Duties - Delivering articles of incorporation to the Secretary of State for filing.
4. Listing Requirements - The name and address of each incorporator.
5. Corporate Purpose: New York allows a corporation to be formed for any lawful purpose(s).
6. Minimum Number of Directors - One or more.
7. Eligibility Requirements - The articles of incorporation or bylaws may list director qualifications. A director does not need to be a resident of this state or a shareholder of the corporation unless stated in the articles of incorporation or bylaws.
8. Listing Requirements - When incorporating in New York, directors are not required to be listed in the Articles. Either the articles or the bylaws may specify the number of directors.
9. Officers are not required to be listed in the articles of incorporation.
10. The articles must list the number of shares the corporation is authorized to issue, including certain information on classes and the par value of each share.

MAIN ADVANTAGES TO INCORPORATE IN NEW YORK
The main advantages of incorporating in New York are: lawsuit protection, credibility, tax savings, deductible employee benefits, anonymity, and the simplicity of raising capital. By creating a separate legal entity for personal protection purposes, a New York corporation has a broad range of powers beyond that of the standard sole proprietorship such as small claims court benefits, separate liability for corporate debts, and best of all perpetual duration. When you incorporate in New York you create a separate legal individual.

When you register business in New York you form a separate entity from the one or ones who own the corporation. Consequently, when a New York corporation is sued, there are provisions in the law which protects the owners (shareholders) and mangers (officers and directors) from all personal liability.

Forming an LLC (Limited Liability Company) in New York is simple. If you incorporate a New York LLC you will receive protection from personal liability for things like lawsuits ad other financial claims against the company. In an LLC, you do not issue stocks to raise funds, or revenue for capital investment. Instead, members are issued interest certificates that reflect the amount or share of their investment in the company. An LLC is run by the members, and the power vested in these members is determined by percentage of ownership. You can register an LLC by filing with the office of the Secretary of State. In most cases this process is simple, and takes as little as a couple of days to complete. It's a good idea to consult with an attorney or other financial adviser before filing for this status. You may want to weigh the alternatives to determine which business structure meets the needs of your business, your customers and your partners.

NEW YORK LIMITED LIABILITY COMPANY (LLC) FORMATION
Effective October 24, 1994, New York State Law allows for the formation of limited liability companies (LLC’s) in New York State (domestic LLC’s). In addition, recognition is given under New York State Law for LLC’s formed under the laws of other states (foreign LLC’s). A new business that is an LLC, or an existing business converting to an LLC, may also have registration, permitting and bonding responsibilities for other taxes administered by the Department. The formation of a domestic New York LLC is governed by the New York Limited Liability Company Law (Chapter 34 of the Consolidated Laws). Domestic LLC’s are required to register with the New York State Department of State. In addition, foreign LLC’s that wish to carry on or conduct business or activities in New York State must also register with the Department of State. The Tax Department does not administer the formation and registration process.

NB: A foreign LLC that actually conducts business or other activities in New York State is not relieved of its obligation to file tax returns, and, if applicable, to pay the annual filing fee, simply because it fails to register with the Department of State.

New York LLC comes into existence when the executed Articles of Organization are filed. The Articles of Organization must include: the LLC's name; the county in which the LLC's office is to be located; the latest date on which the LLC is to dissolve, if specified; the name and address of the registered agent; a statement that all or specified members are liable in their capacity as members for the LLC's obligations, or other liabilities, if that is the case. Any other provisions the members elect to include.

The name of a NY LLC must contain the words, "Limited Liability Company", "L.L.C." or "LLC". Conversely, a New York LLC cannot contain the name "corporation" or "incorporated" and other such forbidden names contained in section 204 of the Limited Liability Company Law. Moreover, names such as "assurance", "insurance", "trust", "finance" require prior permission of the Banking Commission or Superintendent of Insurance. After submission of the Articles of Formation with the Secretary of State, it usually takes three to five days for the Secretary of State to issue a filing receipt.

Effective August 8, 1995, certain investment companies that are established and regulated under Article 12 of the New York State Banking Law are able to organize themselves as limited liability investment companies (LLIC’s). The LLIC option is available only to Article 12 investment companies that serve as holding companies for foreign banking operations. Also, effective July 21, 1997, certain trust companies that are established and regulated under section 102-A of the New York State Banking Law are able to organize themselves as limited liability trust companies (LLTC’s). The LLTC option is available only to Article 3 trust companies that do not receive deposits from the general public and are exempt from obtaining insurance on deposits and share accounts.

Note: The State of New York had required that all Limited Liability Companies created or qualified in New York publish a notice of formation for six consecutive weeks in designated publications. Although not a requirement affecting the good standing of the company, the requirement was a condition precedent to the maintenance of litigation in New York. The County of publication depended on the County where the business office was located. Consequently, the costs of publication often added hundreds to thousands (in New York County) of dollars to the cost of formation. In a recent court decision, the requirement was held to be unconstitutional. The Department of State alludes to this decision in the letter below but takes no position as to the possible appeal of the decision or its effect.

NEW YORK LIMITED LIABILITY COMPANY ANNUAL FILING FEE
Every domestic and foreign LLC that is treated as a partnership and has any income, gain, loss or deduction from New York sources is subject to an annual filing fee. The filing fee applies to each taxable year of the entity that begins on or after October 24, 1994. For purposes of the filing fee, the New York taxable year of the entity is always the same as its federal taxable year.

The total number of members or partners includes all resident and non-resident individuals, estates and trusts, and all corporations or other LLC’s or partnerships that were members or partners of the entity as of the last day of its taxable year. There is no pro-ration of the filing fee if the LLC or LLP has a short taxable year for federal tax purposes. A domestic or foreign LLC that does not have any income, gain, loss or deduction from New York sources, but is required to file a New York State partnership return solely because it has a member or partner who is a New York resident, is not subject to the filing fee.

In addition, a domestic LLC with no New York source income is not subject to the filing fee solely because it was formed under the laws of New York State. Similarly, a dormant LLC having no items of income, gain or loss or deduction is not subject to the fee. Furthermore, an LLC that elects to be treated as a corporation for federal income tax purposes is not subject to the fee. A domestic or foreign single member LLC is not subject to the filing fee. This is true regardless of its level of activity in New York State.

The full amount of the filing fee due must be paid on or before the due date of the partnership return, determined without regard to any extension of time to file. In the case of a calendar year LLC, the fee must be paid no later than April 15. Every LLC required to file a New York State partnership return must complete Form IT-204-LL, Limited Liability Company Filing Fee Payment Form. Form IT-204-LL is used to remit the filing fee or to indicate why the LLC does not owe a fee for the current taxable year.

If the LLC is not requesting an extension of time to file the partnership return, Form IT-204-LL, together with a full remittance for any filing fee due, must accompany the partnership return. If the LLC or LLP is requesting an extension of time to file, Form IT-204-LL, together with a remittance for the full amount of the filing fee, must accompany the extension request. There is no extension of time for payment of the filing fee. If the LLC fails to pay the full amount of filing fee with its extension request, it will be subject to interest, and a late payment penalty of ½% per month, up to a maximum of 25%, on the amount of fee not paid.

SALES AND MISCELLANEOUS TAXES
If an existing partnership becomes an LLC through a conversion agreement under section 1006 of the Limited Liability Company Law, there will generally be no need to obtain new registrations, licenses, etc. The LLC should complete the LLC Request for Information form and return it to the Tax Department.

Exception: For purposes of the taxes imposed under Tax Law Articles 12-A (gasoline and diesel motor fuel taxes), 13-A (petroleum business tax), 18 (alcoholic beverage tax), 20 (cigarette and tobacco products taxes), 21 (highway use taxes), and 21-A (fuel use tax), any change in partnership interest requires a new registration. For example, if there is an addition or substitution of a partner in the conversion to an LLC, the LLC must apply on its own behalf for any registrations, licenses or permits required under these Articles.

NEW YORK LLC – LIMITED LIABILITY COMPANY TAXATION
The Limited Liability Company (hereinafter the "LLC") which chooses to be taxed as a Partnership is exempt from Federal Corporate Income Taxes. Additionally, LLC's taxed as Partnerships are treated as such under New York Law and do not have to pay entity level Corporate Income Taxes. In recent years, the LLC has become a very popular form of business due to these tax advantages.

NEW YORK LLC – OPERATING AGREEMENT
In the State of New York, an Operating Agreement is required by law and must be adopted within 90 days after the filing of the Articles of Organization. The Operating Agreement sets forth, the business of the LLC, its general operation and conduct of its affairs including its rights, powers, preferences, limitations or responsibilities of its members, managers, employees or agents. We can draft the Operating Agreement in conjunction with your LLC formation documents in compliance with New York Law.

The Operating Agreement can be prepared as part of the formation of your LLC, so you may review the Operating Agreement and make changes and discuss it with one of our Attorneys.

SOME OF THE MAIN
OPERATING AGREEMENT PROVISIONS
Provides a frame work for the settlement of disputes between members/owners;
Prevents a member/owner from selling the membership interest to a third party without first offering it to existing owners;
Providing a framework for the purchase of membership interests by the remaining members/owners in the event a member/owner dies, or becomes disabled;
Preventing a member/owner from competing against the LLC both now and as an ex-owner for a stated period of time;
Requiring members/owners to maintain the confidentiality of all customer names and other LLC records;
Preventing a member/owner from impairing the goodwill of the LLC; and
Preventing a member/owner from soliciting customers of the LLC except for the LLC’s business.

STATE OF NEW YORK LIMITED LIABILITY COMPANY
LLC PUBLICATION REQUIREMENT
MANDATORY UNDER NEW YORK LAW
Section 206 of the Limited Liability Company Law of the State of New York states:
Upon the effectiveness of the initial Articles of Organization of an LLC, a copy of same or a notice containing the substance thereof shall be published once each week for six successive weeks, in two newspapers of the county in which the office of the LLC is located, one must be a daily newspaper and the other a weekly newspaper designated by the County Clerk. Proof of such publication by the Affidavit of the publisher or printer of each newspaper must be filed with New York State within 120 days after the effective date of the Articles of Organization of the LLC.

Remember, if an LLC fails to file proof of publication with the State of New York within 120 days after the formation of the LLC, the authority of the non-complying LLC to carry on, conduct or transact business in the State of New York shall be suspended, effective as of the expiration of the 120 days.

SUMMARY
We will form your limited liability company under the personal direction of a qualified attorney who makes certain that all requirements are met. When forming an LLC, we strongly recommend the owners obtain the maximum protection permitted by current laws. The best way to protect yourself is to enter into an Indemnification Agreement and Operating Agreement at the time of the filing of the LLC. For example, you may include in your Articles of Organization a special provision to protect the officers from any actions they take on behalf of the company called "Indemnification". With an Indemnification and Covenant Not to sue Agreement, the LLC agrees to indemnify and hold harmless its operating managers (those who act as agents of the LLC and represent the LLC's interest in day to day business transactions).

Once the Indemnification Provisions are in effect, the LLC is responsible should there be any legal action taken against its representative for actions taken on behalf of the LLC. In other words, the Company would have to pay any legal fees or liabilities assessed against its management staff. In the State of New York, an Operating Agreement is required and must be adopted within 90 days after the filing of the Articles of Organization. The Operating Agreement sets forth, the business of the Limited Liability Company, its general operation and conduct of its affairs including its rights, powers, preferences, limitations or responsibilities of its members, managers, employees or agents.

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