- An LLC or LLP treated as a partnership for federal income tax purposes is treated as a partnership for New York tax purposes.
- An LLC or LLP treated as a corporation, including an S corporation, for federal income tax purposes is treated as a corporation for New York tax purposes or as a New York S corporation if the New York S election is made (or if it is a mandated New York S corporation).
- A single-member LLC (SMLLC) treated as a disregarded entity for federal income tax purposes is treated as a disregarded entity for New York tax purposes.
- If the SMLLC is disregarded and the single member is an individual, the SMLLC is treated as a sole proprietorship for New York tax purposes.
- If the SMLLC is disregarded and the single member is a corporation, including an S corporation, the SMLLC is considered a division of the corporation for New York tax purposes.
- If the SMLLC is disregarded and the single member is a partnership, the SMLLC is considered a division of the partnership.
Tax responsibilities
- An LLC treated as a sole proprietorship must report its business income and expenses on the individual's New York State personal income tax returns.
- An LLC or LLP treated as a partnership may be required to file a Form IT-204, Partnership Return.
- An LLC or LLP treated as a corporation for federal income tax purposes may be required to file a New York State corporation franchise tax return.
- An LLC or LLP may be required to pay a filing fee and/or estimated income tax on behalf of certain partners or members.
Converting an existing partnership or professional partnership
If an existing partnership becomes an LLC through a conversion agreement under section 1006 of the Limited Liability Company Law, there generally is no need to obtain new registrations, licenses, or permits required by the Tax Law. Also, when an existing professional partnership registers with the Secretary of State as an LLP, there is no need to cancel any existing registrations, licenses, or permits, and reapply for new ones.
However, in either case, the LLC/LLP should complete the LLC/LLP Request for Information form and return it to the Tax Department. The information will be used by the Tax Department to reflect the LLC/LLP status and update business account information.
Exception: For purposes of the taxes imposed under Tax Law Articles 12-A (Tax on Gasoline and Similar Motor Fuel), 13-A (Tax on Petroleum Businesses), 18 (Taxes on Alcoholic Beverages), 20 (Taxes on Cigarettes and Tobacco Products), 21 (Highway Use Tax), and 21-A (Tax on Fuel Use), any addition or substitution of a partner of the registrant requires a new registration. For example, if there is an addition or substitution of a partner in the conversion to an LLC, the LLC must apply on its own behalf for any registrations, licenses or permits required under these Articles.
If a partnership was required to file a bond or other security with the Tax Department, a rider or other documentation demonstrating the continued application of the bond to the LLC must be executed and submitted as an addendum to the bond or other security.
If business assets are transferred to an LLC from a partnership required to collect sales and use tax, the LLC must file Form AU-196.10, Notification of Sale, Transfer, or Assignment in Bulk, with the Tax Department. For more information, see Tax Bulletin TB-ST-70, Bulk Sales.
If a partnership that owns an interest in real property changes ownership in connection with the conversion to an LLC, the real estate transfer tax (Article 31 of the Tax Law) may be imposed. For more information, see Form TP-584, Combined Real Estate Transfer Tax Return, Credit Line Mortgage Certificate, and Certification of Exemption from the Payment of Estimated Personal Income Tax, and its instructions.
Changing an existing sole proprietorship or corporation
When a sole proprietorship or corporation goes out of existence as a result of the formation of an LLC, the sole proprietor or corporation has certain tax obligations to fulfill with the Tax Department. The sole proprietor or corporation must:
- file final business tax returns,
- pay any taxes or fees due, and
- surrender all certificates of registration, permits, and licenses it obtained.
The newly formed LLC must apply for any registrations, licenses, or permits required by the Tax Law. These will not be transferred from the sole proprietorship or corporation to the LLC. In most cases, the new LLC cannot legally engage in business until the appropriate registrations, permits, or other documents have been obtained from the Tax Department. Therefore, the business owner must consider this when planning the change from an existing business to an LLC.
Additionally, when a New York corporation changes to an LLC, the corporation must formally dissolve to avoid further New York State corporate tax liability. If the business is a foreign corporation authorized to do business in New York, it must surrender its authority to do business in New York to avoid further New York State corporate tax liability. For more information, call the Corporation Dissolution Unit at (518) 485-2639.
If business assets are transferred to an LLC from a sole proprietor or corporation required to collect sales and use tax, the LLC must file a Form AU-196.10, Notification of Sale, Transfer, or Assignment in Bulk, with the Tax Department. For more information, see Tax Bulletin TB-ST-70, Bulk Sales.
If an ownership interest in real property is transferred by a sole proprietor or a corporation in exchange for an ownership interest in an LLC, the real estate transfer tax (Article 31 of the Tax Law) may be imposed. For more information, see Form TP-584, Combined Real Estate Transfer Tax Return, Credit Line Mortgage Certificate, and Certification of Exemption from the Payment of Estimated Personal Income Tax, and its instructions.
For more information
- Personal Income Tax for Business Taxpayers
- Partnership and LLC/LLP tax forms
