Compliance with the New York LLC Transparency Act Necessary for Many Mintz Clients

Clients with Limited Liability Companies in New York Likely Impacted

 
New York Governor Kathy Hochul recently signed the New York LLC Transparency Act (NYLTA) into law. The act, which will become effective on December 21, 2024, shares many similarities with the Corporate Transparency Act (CTA), which requires US entities to disclose the personal information of their beneficial owners to the Financial Crimes Enforcement Network (FinCEN), a division of the US Treasury Department.

The NYLTA is similar to the CTA but pertains exclusively to limited liability companies formed or authorized to do business in New York. The purpose of the NYLTA is to prevent the use of anonymous LLCs for illicit activities, including money laundering, fraud, tax evasion, and violations of real estate leasing, campaign finance, and government contracting laws.

What is a Reporting Company?

The NYLTA incorporates the same definitions of “Beneficial Owner” and “Reporting Company” as outlined in the CTA, but in the New York law, they apply only to limited liability companies. The bill requires both existing and newly formed LLCs in New York — including foreign LLCs that register to do business in the state — to file a list of their Beneficial Owners with the New York Department of State (DOS).

The NYLTA adheres to the same list of 23 exemptions as the CTA, including an exemption for “large operating companies” having (i) more than 20 full-time, US-based employees, (ii) a physical operating presence in the US, and (iii) more than $5 million in US-sourced gross receipts or sales. Other exemptions apply to investment advisers registered with, and venture capital fund advisers that report to, the SEC, charitable organizations, and companies such as banks and insurance companies that are regulated by other federal agencies.

Unlike the CTA, the NYLTA requires companies to submit a statement, signed by a manager of the LLC, with the Department of State indicating the specific exemption(s) on which it relies.

Who is a Beneficial Owner?

Beneficial Owners generally are (i) individuals who exercise “Substantial Control” OR (ii) individuals who directly or indirectly own or control 25% or more of the Reporting Company.

“Substantial Control” over the Reporting Company means the individual (i) is a senior officer (e.g., general counsel, chief executive officer, chief operating officer, etc.); (ii) has authority to appoint or remove certain officers or a majority of directors of the Reporting Company; (iii) is an important decision-maker; OR (iv) has any other form of substantial control over the Reporting Company.

Information to Be Reported to the Department of State

All reporting companies must disclose the following information regarding each beneficial owner:

• Full legal name
• Date of birth
• Current business street address
• A unique identifying number from an acceptable identification document as defined in the CTA (such as a US passport or driver’s license)

Effective Date

The NYLTA has two key effective dates relating to initial reporting:

• Reporting Companies formed or registered to do business after December 21, 2024 must file the initial disclosure simultaneously with the filing of the entity’s articles of organization or application for authority.
• Reporting Companies formed or registered on or before December 21, 2024 have until January 1, 2025 to report.

If a reporting company does not file its required disclosure for longer than 30 days after the applicable deadline, the state may mark it as either “past due” or “delinquent” and, in some cases, a civil penalty of $250 will be owed.

Ongoing Reporting Requirements

In addition to the initial reporting requirements, Reporting Companies must also report changes within (90) days of any change to the information disclosed to the DOS.

Is Reported Information Publicly Available?

The information regarding the beneficial owners will be stored in a private database, accessible only to federal and state law enforcement agencies. Initially, the bill proposed that the database would be public, disclosing the names of reported beneficial owners. However, in response to privacy concerns, Governor Hochul opted to amend the bill, ensuring the database remains private except for law enforcement access. The amendment is slated to be in place before the NYLTA goes into effect.

How to File Reports

Reporting Companies must file with the DOS.

Next Steps

Clients cannot yet file but should stay aware of the key effective dates. Please contact your Mintz team to discuss any questions you may have about the NYLTA implications for you and your entities.

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