Despite a recent federal court ruling that struck down the Corporate Transparency Act (CTA) as unconstitutional, New York is moving forward with the implementation of its own similar law.
The Corporate Transparency Act is a U.S. federal law aimed at combating financial crimes by requiring certain companies to disclose their beneficial ownership information to the Financial Crimes Enforcement Network (“FinCEN”). In December 2023, New York Governor Kathy Hochul signed into law the NY Limited Liability Company Transparency Act (“NY LLCTA”), which closely resembles the CTA.
Although the NY LLCTA shares many similarities with the federal CTA, there are some important differences that New York business owners must understand.
What is the NY Limited Liability Company Transparency Act?
The NY LLCTA is a state law that requires any limited liability company (“LLC”) formed in New York or authorized to do business in New York to file a beneficial ownership report with New York’s Department of State, unless the LLC qualifies for one of the NY LLCTA’s exemptions. The NY LLCTA list of exemptions is identical to the CTA’s exemptions and includes banks, credit unions, insurance companies, and other types of entities. Unlike the federal CTA, the NY LLCTA requires LLCs seeking an exemption to file a statement with the Department of State indicating which exemption they qualify under.
What is a beneficial ownership report?
Under the NY LLCTA, a beneficial ownership report is a statement filed with the Department of State that includes identifying information for beneficial owners of the reporting LLC. For the purposes of the NY LLCTA, a beneficial owner is any individual who either exercises substantial control over the LLC or holds 25% or more of the LLC’s ownership interests.
A New York LLC’s beneficial ownership report must include the owner’s and company applicant’s legal name, date of birth, current home or business street address, and a unique identifying number from an acceptable document, such as a driver’s license or passport. The NY Department of State will accept a beneficial ownership report submitted to the federal FinCEN, if that report contains all the information required under the NY LLCTA.
Will the information in my beneficial ownership report be publicly available?
When the NY LLCTA originally became law in December of 2023, it aimed to create a public database containing ownership information. However, due to significant backlash over privacy concerns, Governor Hochul signed an amendment to the NY LLCTA that removed the public database from the act. As a result of this revision, the NY LLCTA now closely aligns with the privacy standards of the federal CTA, permitting only specific government agencies to access beneficial ownership information.
When will the NY Limited Liability Company Transparency Act take effect?
The amended NY LLCTA becomes effective on January 1, 2026. More specifically, any LLC formed or registered to do business in New York before January 1, 2026, must file a beneficial ownership report with the NY Department of State by January 1, 2027. Any LLC formed or registered on or after January 1, 2026, must file a beneficial ownership report within thirty days of filing its Articles of Organization or Application for Authority. Additionally, unlike the federal CTA, the NY LLCTA imposes an annual filing requirement. This annual statement must be filed with the Department of State and must either confirm or update:
- The LLC’s beneficial ownership information,
- The street address of the LLC’s principal office,
- The LLC’s status as an exempt company, if any of the exemptions apply, and
- Any other information specifically required by the Department of State.
What happens if you fail to comply with the NY Limited Liability Company Transparency Act?
Any LLC that fails to file the required disclosures within 30 days of when the report is due will be shown as “past due” or “delinquent” on the Department of State’s records. For each day the LLC is “past due,” the Attorney General may assess a fine of up to $500. Removing the LLC’s “past due” status will require payment of all such fines plus an additional fine of $250.
Conclusion
While the future of the federal Corporate Transparency Act remains uncertain, New York’s version of the CTA is still moving forward. Companies must now ensure that they comply with both the CTA and the NY Limited Liability Company Transparency Act to avoid possible financial penalties.
If you own a NY LLC, it is important that you consult with an experienced attorney familiar with both the CTA and the NY LLCTA to ensure you understand your reporting obligations. Contact a member of our team today.
Contributions to this blog by Ru Hochen.
