New York, Let’s Stop Penalizing New Businesses


ny llc reform

Small businesses and startups are the cornerstone of this country’s economic growth. And yet, despite all of New York’s initiatives to promote small business and start-up growth in this state, it has continued to keep a multi-million dollar roadblock in place. Known as the “LLC publication requirement,” this law makes newly-formed New York limited liability companies (LLCs) and out-of-state LLCs seeking to do business in New York purchase newspaper notices announcing their formations.

The cost of the notices vary by county from approximately $250 to $2,000. When multiplied by the number of LLCs formed in New York each year, this represents millions of dollars of start-up capital that is taken from new businesses and given to newspapers. For instance, based on a search of New York Law Journal’s website, it published over 20,000 LLC notices of formation last year, earning over $14 million based on its minimum charge of $723.50 per notice.

The original purpose of the law was understandable. The Legislature wanted to provide the public with a way to know about new entities that shielded its owners from liability, and newspapers were the best means for doing, so when the law was enacted. Today, there are far more effective ways to inform the public than newspapers selected by the county clerk. For instance, one readily imaginable solution is a Department of State website, which would provide immediate and greater access to the same information. And, most of the same information in the notices can already be found by searching the Department of State’s website.

So, if the aim of the law can be better achieved without taking millions of dollars from new businesses, why hasn’t the law changed? It’s certainly not because legislators have forgotten about the issue. Each year, bold New York legislators (such as Senator Krueger and Assembly member Kellner) propose bills to repeal the publication requirement, but the committees responsible for moving the bills forward fail to take any action.

The Legislature’s failure to undertake this common-sense reform can likely be attributed to the strength of the New York newspaper lobby and its interests. While some newspapers may lose a substantial amount of their revenue and may face the risk of insolvency if the law is changed, small businesses and startups regularly face the same risk. New businesses should not be the ones forced to provide subsidies to newspapers from their startup capital.

It’s time to repeal the LLC publication requirement. The law is no longer suited to serve its original purpose and is costing New York businesses millions of dollars each year. New York is also losing out on revenue from corporate and payroll taxes that could be collected if these businesses were able to use the money to grow their companies and create jobs. New York technology and small business communities have to unite in telling the Legislature that we want the LLC publication requirement immediately repealed.

You can help by (1) signing up as a supporter at LLCreform.org; (2) sharing the campaign; and (3) telling key New York legislators via LLCreform.org.

Image credit: CC by JefferyTurner

About the author: Nehal Madhani

Nehal Madhani is the founder of PlainLegal, which helps small businesses and startups solve legal problems by connecting them with a trusted and affordable lawyer. Before starting PlainLegal, he practiced as a lawyer at Kirkland & Ellis, where he advised investors and multi-billion dollar companies in corporate restructurings, and founded Bluefreak, an online marketplace for college students. Nehal has a JD from the University of Pennsylvania Law School, a Certificate in Business and Public Policy from the Wharton School of Business, and a B.A. from Northwestern University.

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