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You can choose to expand in any year, but you must do it on July 1, the starting date of each new season. To expand, go to the League Edit screen, and click on the Structure Editor. From there, you can add new teams (as well as delete them, and make changes to the conference/divisional setup.)
After you've added a team, there will be a "Draft?" button to the right of its name. Selecting this box wiill mark the team as a participant in the expansion draft. Once you've made your changes and have at least one team participating in the draft, the "Generate Draft" button will become active, allowing you to schedule an immediate expansion draft.
In the draft, Existing teams must submit a protected list of players, and any non-protected eligible player is eligible for selection. This includes the rights to players if they are currently restricted free agents. The rules on who must be protected roughly conform to the NHL's practices with the last few expansion drafts. (Unfortunately, due to the timing of expansion in the game, you'll miss the entry draft because it was held in June. As compensation, the expansion draft goes a few rounds longer than it normally would, allowing you to take more players.)
Note that if you want your expansion team to have farm teams, they must be added to their own league, and the parent team's farm team data edited to set up the farm relationship.