In order for an individual to run a business from their home in New York State, it must be owned and operated by the individual living in the residence. Only one individual who is not residing in the home may be employed there.
The home office or area of operation of the home business can occupy up to 25% of the residence and a maximum of 500 square feet. If an individual wants to run a business from their home, their first step is to develop a business plan.
An individual is required to follow the same steps no matter the size of their business. Even if an individual wants to file their company as a limited partnership, limited liability company, a limited liability partnership, or any other type of corporation, an individual needs to:
- Choose a name that follows New York’s guidelines;
- Register the name with New York’s Secretary of State;
- Select a Board of Directors; and
- Register the business with the IRS to get an Employer Identification Number.
If an individual has any questions regarding running a business from their home, they should consult with a New York attorney.
What Is an LLC?
Limited liability companies (LLCs) are a popular choice for structuring businesses because they combine many of the favorable characteristics of partnerships with some of the more desirable features of corporations. LLCs have numerous characteristics, such as limited liability for all of the owners, referred to as members, and pass-through taxation.
Pass-through taxation means that the profits are taxed as a part of the income of the members and not as a separate entity. An LLC that is formed in New York is required to comply with the New York Limited Liability Company Law.
What Are the Requirements for an LLC?
In the State of New York, the Secretary of State enforces numerous requirements for LLCs. Although LLCs are not required to be formed by members, they are required to have at least one member.
If an LLC does not offer a professional service, the name of the business must include:
- Limited liability company;
- LLC;
- L.L.C.
If a company offers a professional service, such as dentistry, the name of the LLC may also end with:
- PLLC;
- P.L.L.C.;
- Professional Limited Liability Company.
In addition, the name of the business must be distinguishable from other names that exist for state-registered companies. There are several words and phrases that are prohibited from being used in LLC names in the State of New York, including:
- Urban development;
- Corporation;
- Lawyer.
Section 204 of the New York Limited Liability Company Law provides a comprehensive list of prohibited words and phrases. An operating agreement can be used to establish the rights and duties of its members within 90 days of the formation of the LLC.
The LLC must also determine which county to incorporate in. The owner has to file the correct paperwork with the New York Secretary of State to operate the company as an LLC.
For six consecutive weeks, unless the LLC is a theatrical production company, the owner is required to publish a notice of the LLC’s existence in one weekly newspaper and one daily newspaper.
What Paperwork Do I Need to Form an LLC?
In New York, an LLC has to be registered with:
- The Division of Corporations;
- State Records;
- Uniform Commercial Code of the New York State Department of State.
There are different paperwork requirements for standard domestic LLCs, domestic professional services LLCs, standard foreign LLCs, and foreign professional services LLCs. An LLC that originated in New York is domestic.
An LLC that originated in another state or country is a foreign LLC. A domestic LLC is required to file Articles of Organization.
Domestic professional services LLCs are required to file Professional Services Articles of Organization. Many of the information requirements are the same for both of these forms.
In order to complete either of the forms, the owner will be required to provide certain information, including:
- The name of the LLC;
- The county where the LLC will maintain its primary office;
- A mailing address for the LLC where copies of legal documents given to the Secretary of State for the LLC can be sent;
- The signature of the person or entity organizing the LLC; and
- The address of the entity or person filing the Articles of Organization.
It is also necessary to list the profession in which the professional services LLC will engage on the Professional Services Articles of Organization form, as well as the names and addresses of any registered professionals or individuals. In addition to this, the form must include the names and addresses of those owners, managers, and directors who will be the LLC’s original members or managers.
There are separate forms for standard foreign LLCs and foreign professional services LLCs. With a foreign professional service LLC, an Application for Authority is required.
With a standard foreign LLC, a Professional Services Application for Authority is required. In order for an authority application to be submitted, an individual is required to provide:
- The LLC’s original name;
- An alternative name if the original name does not meet the naming requirements in New York;
- Its original formation date and location;
- The county in which it would like to be incorporated;
- Its mailing and principal office addresses;
- The profession the LLC will practice;
- The signature of the filer; and
- The names and addresses of the government entity with which the LLC was originally registered.
The professionals who are involved in the LLC will be required to provide their:
- Name;
- Address;
- New York license number, if they have one.
The individual who is filing the Professional Services Application for Authority must also sign it and provide their address. At the same time as their Applications for Authority, foreign professional services LLCs and standard foreign LLCs must also file a Certificate of Existence.
Once the required notice has been published, the LLC is also required to file a Certificate of Publication.
How Much Does It Cost to Register a Small Business?
In New York State, the formation filing fee for an LLC is currently $200. An owner is required to submit Articles of Organization to the New York Secretary of State in order to officially form a New York LLC.
Does It Depend on What I am Doing/Selling?
An individual needs a license to run a service business from their home, such as a salon, daycare, or restaurant. Because of the disruption that can be caused to a neighborhood, many residential areas forbid individuals from running businesses out of their homes, for example, alcohol-serving restaurants.
The presence of children in a business such as a daycare can add an extra layer of regulation. Other issues may include how many children can be watched, how long the owner intends to watch the children, and numerous other factors.
Does My Home Need to Be Zoned for Business?
Whether or not an individual’s home needs to be zoned for business will depend on the type of business they want to operate. An individual may want to operate a business that will bring customers to their home and sell things such as alcohol. If that is the case, their home needs to be zoned for a business.
An individual cannot easily have their home rezoned for commercial use if it is zoned as a residential area. It is important to ensure that an individual is aware of what is permitted in their neighborhood before attempting to own their own business.
Even if an individual’s neighborhood is zoned for a business, such as a daycare, it does not mean that it is zoned for a business, such as a restaurant. It is important for an individual to see whether an area is zoned for business as well as what type of business.
What if I Am Running an Online/Mailing Business?
In order for an individual to operate their online business, they may need a license. An individual will need a permit if they are mailing products or offering services, such as legal services or taxes.
An individual will need to obtain a permit from the State of New York as well as the county in which the business will operate. An individual might operate an online business across the country or even internationally. If so, an individual must have a permit to operate in the county where their principal place of business is.
Do I Need a Lawyer’s Help?
If you want to start a business in New York, it is essential to consult with a business lawyer in New York. Your attorney can advise you regarding how to start your business as well as assist you with properly completing the paperwork and filing it.
Your lawyer can advise you whether your home is zoned for the business you wish to operate and, if not, whether your residence could be re-zoned. Having a lawyer help you start your home-based business gives you the best chance at success.
