Whether you've been in operation for decades and you're ready to close up shop or your good idea that never picked up steam is ready to meet its untimely demise, all limited liabilities companies in New York State must follow some simple guidelines in order to officially dissolve and close out a business. Shutting down an LLC in New York is known as dissolution. Prior to officially dissolving the business, the owners will engage in the process of "winding up," which involves some of the requirements typically laid out in the LLC's operating agreement, like paying off debts and distributing assets.
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In order to answer the question posed in the title of this post, it's important to understand the distinction between a sole proprietorship and a limited liability company ("LLC"). The most important distinction is that a sole proprietorship is not actually a corporate entity separate from the owner, like a corporation or LLC. When someone chooses to operate their business as a sole proprietorship, they are simply running their affairs under their personal name and accept unlimited liability (i.e., your personal assets are at risk) as they carry out the nature of their work. Of course, this has inherent risks, but it is by far the cheapest option available for anyone looking to start a business.
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If there's one thing about New York that most people can count on, it's that we like to stand out, be unique, and sometimes add complex layers to simple situations just for the fun of it. You certainly can't be called the "Greatest City in the World" without some added complications. Given New York's reputation, one of the most stubborn law's that just won't go away is the Limited Liability publication requirement. In fact, we are the only State in the entire country that still has this step in the limited liability company formation process.
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Moving out of New York City comes with some immediate perks, like more space, a lawn, a bigger home and lower taxes. So for most people thinking about moving to New Jersey, the benefits most often outweigh the costs and crossing the bridge becomes a simple choice. However, for business owners, there is one extra item that needs to be addressed during your move in order to ensure that you may continue legally operating your business in your new home state.
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In order to discuss this topic, it's important to gain a basic understanding of the legal concept of "piercing the corporate veil." What this means is that in certain circumstances, when properly invoked, a court may "pierce the veil" of a corporate entity and hold the owners personally liable for the obligations of their corporation or LLC. It allows for a corporation's separate legal existence to be disregarded in order to prevent fraud and achieve fairness. This doctrine is often invoked by a third-party seeking to circumvent the limited liability that is afforded to owners and hold them liable for corporate obligations.
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So, you’ve started a business on Etsy. Whether you’re creating screen printed shirts, custom leather goods, pottery or furniture, you made the decision to bring your talent, skills and keen eye for design to the masses and sell your products online. Congratulations! Etsy is a great place for those that are looking to turn a hobby into a money making opportunity or grow a business that has quickly jumped out of the idea phase and into reality. If you’ve ever had the thought, “what do I need to do to make this Etsy business legitimate,” this post is for you.
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Plain and simple . . . the New York Limited Liability Company Law requires at a minimum, that all LLCs adopt an operating agreement within 90 days of filing their articles of organization. However, despite this requirement, many LLCs operate on a daily basis without an agreement. While the NY LLC law is strict in its requirements, it is not explicit as to whether a business faces any fines or other consequences for failure to adopt an operating agreement. Given the lax enforcement of these provisions, businesses continue to run without fulfilling this simple requirement.
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So you’ve made the decision to start your own business. Congratulations! For many people, this major life decision often comes with more questions than answers. One question that I hear regularly is, “my friend recently started a new business and she registered as an LLC, do I need an LLC to start my business?”
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