We recently wrote about the federal Corporate Transparency Act (“CTA”) and its new beneficial ownership information (“BOI”) reporting rules for privately held companies that are set to take effect in 2024. New York State has also passed its own act modeled after the CTA, but with some key differences. On June 20th, the New York legislature passed the LLC Transparency Act (“the LLC Act”) which is currently awaiting the signature of Governor Kathy Hochul and would take effect 365 days after being officially signed into law.
Just like the CTA, the LLC Act is intended to end the anonymous ownership of certain entities in order to combat crimes such as fraud, money laundering, tax evasion, organized crime, and other illicit activity that evades detection through the guise of anonymous shell companies. The LLC Act adopts the same definition of “beneficial owner” as the CTA (defined in 31 U.S.C. § 5336): Anyone who directly or indirectly exercises substantial control over an entity or controls at least 25% of the ownership interests of an entity.
The LLC Act will require reporting companies to provide the following information for each of their beneficial owners:
- Full legal name
- Date of birth
- Current business street address
- Unique identifying number from an acceptable identification document (as defined in 31 U.S.C. § 5336), such as a passport or driver’s license
By contrast, however, the LLC Act does not require the information of “company applicants” who are the individuals filing the organization documents for the company, as the CTA does. Additionally, where the CTA requires multiple types of companies to disclose their BOI, the LLC Act only includes limited liability companies organized in New York state and foreign limited liability companies with authority to do business in New York state. Significantly, the LLC Act does not apply to corporations, whereas the CTA does.
But perhaps the most notable difference between the CTA and the LLC Act is the public availability of the BOI that’s submitted. While the CTA requires that disclosed BOI be kept in a secure online database accessible only to governmental agencies and law enforcement, the LLC Act requires the creation of a publicly accessible database maintained by the New York secretary of state. The general public will therefore be able to search for and obtain the legal name and business address (other disclosed BOI will be kept confidential) for beneficial owners of virtually every LLC organized or operating in New York. The LLC Act explains its reason for mandating a publicly accessible database as a way to extend the benefits of beneficial ownership transparency to New York citizens and local state government—something that the CTA does not do.
In select instances, beneficial owners with “significant privacy interests” can apply for waivers to keep their information confidential. As two examples of who would be eligible for such waivers, the LLC Act refers to whistleblowers who are using LLCs to file lawsuits under the False Claims Act and “individuals participating in an address confidentiality program.” The latter category can include victims of domestic violence, stalking, sexual offense, kidnapping, and human trafficking as well as reproductive health care service providers or patients.
Reporting companies formed on or before the date on which the LLC Act becomes effective must file BOI reports by January 1, 2025. Companies formed after the date on which the LLC Act becomes effective must file BOI reports along with their articles of organization.
If you have any further questions regarding the requirements of New York’s LLC Transparency Act, please contact Charles Hughes.
