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New York LLC Transparency Law

Just when you thought you might be figuring out the Corporate Transparency Act, along comes the New York LLC Transparency Act to add to the confusion of all.

The New York LLC Transparency Act.

The New York Assembly in late June passed a bill (AO3484) entitled the “LLC Transparency Act.” New York Governor Kathy Hochul has not yet signed the bill into law, but it passed on a party line vote and the Governor is expected to sign it into law.

In light of the pending implementation of the Corporate Transparency Act on January 1, 2024, this similarly named (but very different) state law is likely to raise confusion among business owners.

The New York LLC Transparency Act would require a NY LLC, at the time it files its articles of organization, to file “a beneficial ownership disclosure” that identifies “each beneficial owner by: (1) full legal name; (2) date of birth; (3) current business street address and (4) a unique identifying number from an acceptable identification document defined in 31 USC 5336(a)(1).”

The NY law provides that “where an initial report contains the information required herein, a reporting company may submit a copy of the initial report, submitted to the federal government pursuant to 31 USC 5336, to satisfy the requirements of this section.”

Like the CTA, the NY law provides that the identifying information of beneficial owners “shall be deemed confidential except for the purposes of law enforcement.”

Notwithstanding that confidentiality, however, the NY law requires the NY Secretary of State to maintain “a publicly available database on its website for each entity organized in New York state and each foreign business entity with authority to do business in the state that includes” basic identifying information, including “the full legal name or names of each beneficial owner, for every limited liability company and foreign limited liability company where such companies are also reporting companies.”

The statute requires the Secretary of State to establish regulations to allow beneficial owners of LLCs to apply for a waiver to withhold their name from the database.

The NY law indicates that the phrase “significant privacy interests” include:

“where a beneficial owner is a natural person participating in an address confidentiality program, or is a member of a limited liability company acting as a relator in a qui tam action filed pursuant to section one hundred ninety of the state finance law, or 31 USC 3729.”

The NY law will take effect on the first anniversary of its enactment.

Key Differences Between the NY LLC Transparency Act and the federal Corporate Transparency Act

  • Among the many differences, here are some of the most important:
  • The CTA applies to corporations, LLCs and other reporting companies, but the NY law only applies to LLCs formed or doing business in the State of New York.
  • The CTA contemplates FinCEN maintaining all the BOI data it collects in secrecy. The NY law contemplates the NY secretary of state disclosing beneficial owner names and addresses.
  • The CTA requires beneficial owners to disclose their “residential street address.” In contrast, the NY law expressly requires “current business street address”.
  • The CTA exempts from reporting any reporting company that falls into one of 23 exempt categories. The NY law would require an exempt LLC to file “a statement signed by a member or manager indicating the provision [of the CTA] excluding such company from the definition of a reporting company to file an initial report.”
  • The CTA imposes a $500 daily fine for late reports and imposes felony criminal liability for false or willful noncompliance. The NY law does not. Instead, if a NY LLC fails to file for two years or more, it will be shown as “delinquent” on the NY SOS database. To regain current status, the NY LLC will need to file its delinquent report and pay a penalty of $250.
  • The CTA requires reporting companies to file an amendment within 30 days after any change in previously-reported data. The NY law does not contain a 30 day amendment rule. NY LLCs will only be required to amend their beneficial ownership reports at the time of any amendment to their articles or organization in NY.

Potential for More State Laws that Mimic the CTA

Along with New York, at least one other state is also considering a “state transparency” law that mimics the CTA.

Two bills pending in California follow New York’s lead.

California Senate Bill SB-738 would require foreign corporations and foreign LLCs to report certain beneficial ownership information to the California secretary of state.

Likewise, California Senate Bill SB-594 would require certain LLCs to report beneficial ownership information.

Each of these bills partially overlaps with the CTA but also differs with the CTA in important respects. Keeping track of these competing allegations will pose a challenge for counsel who advise companies and business owners in the U.S. and in states that adopt laws like these.