New York State LLC/LLP Annual Fee Changes

By Alan E. Weiner

MELVILLE, N.Y.—As a consequence of the recently enacted New York state budget bill, some significant changes have been made to the annual fee requirements of limited liability companies (LLC) and limited liability partnerships (LLP). (Note that there still are no annual fees required of general or limited partnerships.)
All of the following changes are effective for tax years beginning in 2003:

1. New York LLCs/LLPs (as well as non-New York LLCs/LLPs filing to do business in New York) have been required to pay a per member/partner “owner” fee of $50 times the number of owners on the last day of the entity’s year-end. Henceforth, the per-owner fee is $100, with a minimum annual fee of $500 (up from $325) and a maximum annual fee of $25,000 (250 owners), up from $10,000 (200 owners).

2. For the first time since LLCs/LLPs were created in New York in 1994, single member limited liability companies (SMLLC) will be required to pay an annual fee; however, the minimum fee for an SMLLC will be $100, not $500.

3. The new filing due date for the annual fees will be within 30 days after the last day of the taxable year.

4. The higher fees are due to expire Jan. 1, 2005; however, the 30-day post-year-end filing deadline will remain as part of the law.

Practitioner Tips

Perhaps the most onerous change is the new filing deadline for the annual fees. Previously, the Form IT-204-LL was due contemporaneously with, and as a part of, the partnership tax return (Form IT-204). For a calendar-year entity, the due date was April 15. Now, the due date is Jan. 30 (for a calendar-year entity), not even the last day of the month. As a consequence of this change:

1. Due date monitors must be reset from the 15th day of the fourth month following year-end to the 30th day following year-end. Many practitioners maintain a Jan. 31 due date monitor; however, this new due date requires a completely new date monitor of Jan. 30 for a calendar-year entity, or, for example, Oct. 30 for a Sept. 30 year-end entity.

2. Extra paperwork (i.e., more file handling) is required because the client’s file will need to be accessed twice a year: once for the LLC/LLP fee and the second time to prepare the entity’s partnership tax return.

3. Tax preparation software programs may not be available and/or loaded in early January.

4. Although the new filing requirement is effective for taxable years beginning in 2003, resulting in the first filing deadline of Jan. 30, 2004 (for existing calendar-year entities), an LLC/LLP created on or after Jan. 1, 2003 (which has a taxable year beginning in 2003), electing a fiscal year-end of, for example, Sept. 30, will be required to file its annual fee form by Oct. 30, 2003, and pay the new higher fee rates.

5. If the new deadline is treated as a tax deadline, then when the 30th day, post year-end, falls on a weekend, the form will be due on the next business day. If it’s not treated as a tax deadline, the form will need to be filed earlier, as a practical matter. Further, if it’s not treated as a tax deadline, extensions of time to file may not be allowed (note: payment would still be due by the original filing deadline).

Single member limited liability companies, which are disregarded for income tax (but not sales tax) purposes and may have been formed and forgotten, but now will need to pay an annual fee, need to be tracked down and put on the due date monitor. (Although not relevant to this article, attorneys and accountants should remind their clients to treat the SMLLC as a separate entity [with a separate bank account and set of books and records] so as to avoid a potential litigating position attempting to pierce the LLC veil.)

Although the higher fees are due to expire Jan. 1, 2005, generally this type of rule has a way of being extended indefinitely.