By: William L. Bricker, Jr. & John Bricker
On December 23, 2023, Governor Hochul signed the LLC Transparency Act (the “Act”) which was passed by both houses of the New York State legislature in June of this year. The Act applies to limited liability companies (“LLCs”) and not regular, or “C” corporations or “S corporations. The Act becomes effective 365 days following the Governor’s signature.
The Act is similar to the federal Corporate Transparency Act (“CTA”). It requires all LLCs formed under New York law and all foreign LLCs that are qualified to do business in New York, to report the identities of their “beneficial owners.” The ownership information is to be filed with the New York Department of State and will be maintained in a “secure” database accessible only to government and law enforcement agencies. Updated reports for LLCs formed in New York must be filed within 90 days following any beneficial ownership change; foreign LLCs must amend their New York qualification application to report any beneficial ownership change, though the required time to report any such change is not clear as of this date. The Act does not include the provision in the version of the Act passed by the New York State legislature which provided for the disclosure of the names of LLC owners in a public database.
The Act defines a “beneficial owner “as a person who exercises substantial control over an LLC or who owns or controls at least 25% of its ownership interests. The following information must be reported to the New York Secretary of State:
beneficial owner’s full legal name,
date of birth,
a unique identification number from an acceptable identification document (e.g., passport or other government issued ID), and
the LLC’s current business street address.
Penalties for delinquent filing will be $250 compared to the CTA penalties of up to $10,000 as well as imprisonment for up to two (2) years.
While the Act is modeled after, and cross-references to the CTA, there are notable differences between the two. The most significant difference is that the Act applies only to LLCs, while the CTA applies to all entities that file with a state Secretary of State or equivalent agency.
Similar legislation is pending in California. Other states may follow suit.