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Will New York’s Latest Attempt to Repeal Publication Requirements Succeed?

By: Teri Mayor, COGENCY GLOBAL INC. on Fri, Feb 08, 2013

Over the years, there have been various bills introduced in New York’s Senate and Assembly proposing to alter or eliminate limited liability company (LLC) publication requirements, yet none of them have made it through the legislative process to New York Publication Requirementsbecome law. The most recent attempt is bill number AB 942, introduced in the Assembly on January 9, 2013, sponsored by Assemblyman Micah Kellner. Its companion bill in the Senate, SB 3259, was introduced by Senator Liz Krueger on January 31,2013. The bills seek to eliminate the publication requirement for domestic LLCs and for conversions of partnerships or limited partnerships to limited liability companies.  In the bill memo, Kellner argues that the current publication requirements are unnecessary and can be prohibitively expensive. He points out that there are no similar requirements for corporations in New York under the Business Corporation Law.  He refutes the idea that publication is needed for the purpose of transparency by arguing that the public is better served by the excellent online database maintained by the Department of State.[1]


Cost of Publication May Discourage Business Start-Ups in NY
While there are other states that require publication of a notice upon the filing of certain documents, New York requires many more instances of the notice’s appearance and is, by far, the most expensive to fulfill. Following the formation or qualification of a limited liability company in New York, a notice of formation listing basic facts about the company must be published once a week for a period of six weeks in two newspapers in the county where the business is principally located. The papers must be approved by the county clerk and one of the papers used must be a daily paper. In New York County, where the county clerk requires publication in the New York Law Journal, it is not uncommon for an LLC to spend more than $1,500 to fulfill its publication requirements. To many, such high costs seem onerous, especially for smaller start-up companies, and it has been argued that the law discourages LLC formation in New York. 


Post-Publication Requirements and Consequences of Failing to Meet Them
Following publication, a Certificate of Publication, accompanied by affidavits of the publishers, must be filed with the Secretary of State. Section 206 of the LLC law indicates that if an LLC that fails to file a Certificate of Publication within 120 days of its initial filing, “the authority of such limited liability company to carry on, conduct or transact any business in this state shall be suspended”[2], but it does not impair the validity of any contract or act of the company. Currently, the Secretary of State’s office is not actively suspending limited liability companies that do not file Certificates of Publication in a timely way.  However, the lack of this filing is indicated on a Certificate of Good Standing, which can create difficulties for an LLC that has not complied with this requirement.

AB 942 seeks to repeal Section 206 of the Limited Liability Company Law, the section that details the publication requirements for Articles of Organization. It leaves intact publication requirements for foreign LLCs who apply for authority to do business in New York as well as similar requirements for limited partnerships. Just introduced, AB 942 has a long way to go to become law in N.Y. It was referred to the Corporations, Authorities and Commissions Committee on January 9th.


Past Attempts to Repeal Publication Requirements Have Been Unsuccessful
In the past, Mr. Kellner has introduced other bills attempting to repeal Section 206 of the LLC Law --  AB 885 in 2011-2012 and AB 4496 in 2009-2010. Another bill, introduced in March of 2011 (AB 6559) by former Assemblyman Robert Castelli, proposed removing publication requirements for all entities. These bills are no longer active.

While many people feel that New York’s publication requirements for limited liability companies should be eliminated to encourage small business in New York State, at this point, there is no way to know whether AB 942 will fare any better than its predecessor bills. Will publication requirements remain the law of the land in New York State?  Only time will tell…


[2] N.Y. Limited Liability Company Law §206(a)

 

This article is provided for informational purposes only and should not be considered, or relied upon, as legal advice.

Topics: Company Formation and Filing Considerations