United States: New York LLC Transparency Act: What You Need To Know

On December 22, 2023 the State of New York adopted the New York LLC Transparency Act (as amended to date, the "NY LLCTA"). The NY LLCTA in many respects follows the federal Corporate Transparency Act (together with any regulations promulgated thereunder, the "CTA"). However, one material difference is that unlike the CTA which applies to many different types of entities, including corporations, limited partnerships, limited liability companies and statutory trusts formed or registered to do business in any state, the NY LLCTA applies only to non-exempt limited liability companies formed or qualified to do business in the State of New York (each such entity, a "Covered Entity").

Disclosure Requirements

The NY LLCTA requires all Covered Entities to disclose certain information regarding each of its "Beneficial Owners" (meaning individuals who, directly or indirectly, own or control at least 25% of, or exercise substantial control over, such Covered Entity) and "Applicants" (meaning an individual who files, or who directs or controls the filing of, an application to form a limited liability company under the laws of the State of New York, or registers or files an application to register a limited liability company to do business in the State of New York). The NY LLCTA borrows many definitions from the CTA, including definitions of "Applicant," "Beneficial Owner" and "Substantial Control."

Like the CTA, the NY LLCTA requires each Covered Entity to disclose the following information regarding its Beneficial Owners and Applicants: (i) full legal name; (ii) date of birth; (iii) current address (which, unlike the CTA, can be a business address); and (iv) unique identifying number from an unexpired passport, state driver's license, or other unexpired identification card or document issued by a state or local government agency or tribal authority for the purpose of identification. Unlike the CTA, the NY LLCTA does not require that a copy of the document used to satisfy clause (iv) of the preceding sentence be provided, and the NY LLCTA does not authorize the use of a FinCEN identifier to be used to satisfy the foregoing information requirements. Further, unlike the CTA which only requires disclosure of information pertaining to Applicants for entities formed after the CTA's effective date of January 1, 2024, the NY LLCTA requires disclosure with respect to Applicants for all Covered Entities, including those formed or qualified to do business in the State of New York prior to January 1, 2026. Such beneficial ownership information must be filed timely with the New York Department of State (the "Department"). Timing requirements are below.

Exemptions

The NY LLCTA uses the same 23 exemptions from reporting as the CTA. Each entity that would otherwise fall within the purview of the NY LLCTA, but satisfies an exemption (each such entity, an "Exempt Entity") must file, under penalty of perjury, an attestation of exemption in such form designated by the Department, which attestation must identify the specific exemption claimed and the facts on which the exemption is based. The timing of filing requirements for attestations of exemption are the same as those for initial disclosures for Covered Entities (see Timing of Disclosures section below).

Timing of Disclosures

While, as originally adopted, the NY LLCTA required filing of initial disclosures simultaneously with the formation of the Covered Entity or Exempt Entity, a recent amendment to the NY LLCTA relaxed this requirement. The NY LLCTA now requires all Covered Entities and Exempt Entities formed or registered to do business in the State of New York on or before January 1, 2026 to file an initial disclosure or attestation of exemption, respectively, with the Department no later than January 1, 2027. Covered Entities and Exempt Entities formed or registered to do business in the State of New York after January 1, 2026 must file an initial disclosure or attestation of exemption, respectively, with the Department within 30 days of the filing of such Covered Entity's or Exempt Entity's articles of organization or application for authority to do business within the State of New York, as applicable.

Unlike the CTA, the NY LLCTA does not require changes to initially disclosed information that occur after the filing of initial disclosures to be reported to the Department as they occur. Instead, all Covered Entities must file an annual statement with the Department confirming or updating beneficial ownership information, the Covered Entity's principal address, the Covered Entity's exempt status (if applicable), and any other information required by the Department. For Exempt Entities, annual statements similar to the initial attestation of exemption must be filed and attested under penalty of perjury.

Filers have a 90-day safe harbor to correct any false or fraudulent beneficial ownership information contained in NY LLCTA filings without penalty, unless such statement was submitted willfully and with the purpose of evading the requirements of the NY LLCTA.

Penalties

The NY LLCTA contains both civil and criminal penalties. Any Covered Entity or Exempt Entity that fails to file its initial beneficial ownership disclosure, attestation of exemption, or annual statement, as applicable, for a period exceeding 30 days will be designated as past due in the Department's records. Any Covered Entity or Exempt Entity that fails to make such filings for a period exceeding two years will be designated as delinquent. The New York Attorney General may assess a penalty of up to $500 for each day such Covered Entity or Exempt Entity has been designated as past due or delinquent. A Covered Entity's or Exempt Entity's past due or delinquent status can be removed once filings are made current, a fine of $250 is paid, and the New York Attorney General verifies that all penalties assessed to date have been paid.

Upon 30 days' notice from the Department, any Covered Entity that fails to timely file its beneficial ownership disclosure or attestation of exemption is deemed suspended and is prohibited from conducting business in the State of New York until such filing has been made. The New York Attorney General is authorized to bring an action to dissolve or cancel any Covered Entity, or to annul a Covered Entity's authorization to do business in the State of New York, if it is delinquent in filing its beneficial ownership disclosure or attestation of exemption or it knowingly provides or attempts to provide false or fraudulent beneficial ownership information, subject to the 90-day safe harbor period discussed in the Timing of Disclosures section above.

Accessibility of Information Disclosed

As originally enacted, the NY LLCTA would have made disclosures accessible via a publicly available database. However, the NY LLCTA was amended on March 1, 2024 to, among other things, remove the public disclosure element. More in line with the access rule under the CTA, this recent amendment to the NY LLCTA requires merely that disclosed information be accessible to certain government agencies and officers upon a court order.

Other States Are Introducing Similar Legislation

Other states, including California and Massachusetts, are currently at various stages of adopting legislation similar to the NY LLCTA. Some such legislation does not limit applicability to limited liability companies, and some contemplate making disclosures made thereunder available to the general public.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.