We all know and despise the extra step of having to publish the formation of a New York limited liability company. It can be expensive, and quite frankly, I don’t see the point.

I rarely see a case that shows you the consequences of failing to comply with this requirement. But here you go:

In Hull Unique Equities LLC v. Boone (2024 NY Slip Op 51311(U)), the plaintiff was reminded that skirting the publication requirement can have real-life consequences.

Plaintiff Hull Unique Equities LLC initiated an action against a tenant to regain possession of a rental property from a tenant. The tenant, however, did her homework and found out that the LLC had failed to comply with New York’s Limited Liability Company Law § 206(a). She filed a motion to dismiss.

According to LLC Law § 206(a), every limited liability company formed in New York must publish its articles of organization in two newspapers and file proof of publication with the Department of State within 120 days of formation. If an LLC fails to comply, its authority to conduct business in the state is suspended. This means that, legally, the company cannot carry on any business, including bringing lawsuits in New York courts.

In the case, the LLC admitted to not complying with the publication requirement but argued that this defect was curable. They claimed they were in the process of rectifying the failure by publishing in the required newspapers and taking all necessary steps for compliance. However, no concrete proof or documentation was provided to substantiate that the cure was genuinely in progress.

The court wouldn’t have any of it. The judge decided this defect was not curable and granted the tenant’s motion to dismiss the case. In this situation, the plaintiff can bring the case again once they comply with the publication requirement. But if this was a case where the time to bring the lawsuit had already expired (the “statute of limitations”), they would be out of luck for good.

Key Takeaways

  1. Non-Compliance can lead to dismissal of the case against the LLC.
  2. Proactive compliance is essential: If you’re forming an LLC, ensure that all legal obligations, especially publication requirements, are met promptly.