United States: New York LLC Transparency Act Update: Finally, Some Clarity

Highlights

• The New York LLC Transparency Act (NY LLCTA) as originally enacted on Dec. 22, 2023, was amended on March 1, 2024, and final, clarifying operating rules were prescribed.
• The NY LLCTA, modeled after the federal Corporate Transparency Act, will require limited liability companies formed, or qualified to do business, in New York state to report their individual beneficial owner information to the New York Department of State (NYDOS). The earliest reporting date will be Jan. 1, 2026, for entities formed on or after that date, and Jan. 1, 2027, for entities formed or qualified prior to Jan. 1, 2026.
• Information reported to the NYDOS will not be accessible to the public.

The New York LLC Transparency Act (NY LLCTA) will become effective as of Jan. 1, 2026, and will require limited liability companies (LLCs) formed, or qualified to do business, in the state of New York to disclose individual beneficial owner information to the New York Department of State (NYDOS). The NY LLCTA is modeled after, and incorporates, many elements of the federal Corporate Transparency Act (U.S. CTA), which became effective as of Jan. 1, 2024, and is administered by the U.S. Department of the Treasury's Financial Crimes Enforcement Network (FinCEN). Nonetheless, notable differences exist between the U.S. CTA and the NY LLCTA, as identified below.

Scope

The NY LLCTA is limited in application to LLCs formed, or qualified to do business, in New York, while the U.S. CTA broadly applies to domestic entities created by the filing of a document with a secretary of state or a similar office under the laws of a state or Indian tribe, and foreign entities registered to do business in the U.S. by the filing of a document with a secretary of state or a similar office under the laws of a state or Indian tribe.

Due Dates for Filings

Initial Reports: Under the NY LLCTA, LLCs formed, or qualified to do business, in New York on or after Jan. 1, 2026, will have 30 days to comply with the new reporting requirements. LLCs formed or qualified prior to Jan. 1, 2026, will have until Jan. 1, 2027, to comply.

The U.S. CTA entered into force on Jan. 1, 2024. Under the U.S. CTA, reporting companies formed prior to Jan. 1, 2024, have until Jan. 1, 2025, to file an initial beneficial owner report; companies formed on Jan. 1, 2024, through Dec. 31, 2024, have 90 days to file an initial beneficial owner report; and companies formed on or after Jan. 1, 2025, have 30 days to file an initial beneficial owner report.

Annual Reports: The NY LLCTA requires that once an initial beneficial ownership disclosure has been filed, all reporting companies must file an annual statement to confirm or update the beneficial ownership disclosure information, the street address of the principal office, status as an exempt company, if applicable, and such other information as may be designated by the NYDOS. This is notably different from the U.S. CTA requirement, which requires updated reports for changes in prior reports to be filed within 30 days of any change.

Corrected Reports:  The NY LLCTA allows for corrected reports to be filed within 90 days of the submission of beneficial ownership information, while the U.S. CTA allows for corrected reports to be filed within 30 days after a reporting company becomes aware, or has reason to know, of any inaccuracy.

Exemption Procedure

If an LLC meets one of the 23 exemptions to reporting under the U.S. CTA, it will also be exempt from the disclosure requirements of the NY LLCTA. Unlike the U.S. CTA, an exempt entity is not automatically excused from the reporting requirements for the NY LLCTA. The NY LLCTA requires the LLC to file an attestation of exemption with the NYDOS, under penalty of perjury, within 30 days of the LLC's formation or qualification to do business in New York, which includes the specific exemption claimed and the basis for the exemption.

Disclosure Requirements

Under the NY LLCTA, an LLC is required to file a beneficial ownership disclosure with the NYDOS, identifying each applicant and beneficial owner by the person's full legal name, date of birth, current home or business street address and a unique identifying number from a valid identification document (company applicant and beneficial owner are as defined under the U.S. CTA).

The NY LLCTA 1) requires company applicant disclosure for LLCs formed or qualified prior to the Jan. 1, 2026, effective date. That is in contrast to the U.S. CTA, which requires company applicant disclosure only for entities formed or registered as of the Jan. 1, 2024, effective date and going forward, 2) allows applicants and beneficial owners to provide a home or business address (rather than specifying that a residential address must be used other than for company applicants who form or register entities in the course of their business, who would use a business address under the U.S. CTA) and 3) does not require a copy of a valid identification document to be included with the disclosure filing. Also, there is no NY LLCTA equivalent of a FinCEN ID, and a FinCEN ID may not be used within the NY LLCTA beneficial ownership disclosure. The inability to use an ID number is an important distinction as relates to confidentiality of personal identifiable information of individuals.

Penalties Under the NY LLCTA

It is unlawful for any person to knowingly provide, or attempt to provide, false or fraudulent beneficial ownership information.

A reporting company that fails to file its beneficial ownership disclosure or attestation of exemption is deemed suspended and cannot conduct business in New York until such filing is made. Once the filing is submitted, the suspension is deemed annulled and all corporate powers are restored retroactively.

A reporting company that fails to file its beneficial ownership disclosure or attestation of exemption, or annual statement 1) for more than 30 days is shown to be past due on the NYDOS records and 2) for more than two years is shown to be delinquent on the NYDOS records. The New York Attorney General may assess a fine of up to $500 per day for each day that the company has been past due or delinquent. Past due or delinquent status can be resolved by making the filing, payment of a $250 fine and verification from the Attorney General that any penalties imposed have been paid.

The Attorney General may bring an action to dissolve, cancel or annul authorization to do business for any entity that is delinquent in filing its beneficial ownership disclosure or attestation of exemption, or that has knowingly provided, or attempted to provide, false or fraudulent beneficial ownership information.

The U.S. CTA contains both civil and criminal penalties.

Method of Filing

Filings with the NYDOS are filed electronically as is generally the case with the U.S. CTA.

Confidentiality of Information

All information relating to beneficial owners who are natural persons collected by the NYDOS will be maintained in a secure database and is confidential, subject to limited exceptions by written request of, or by voluntary written consent of the beneficial owner. (As initially proposed, the information would have been accessible to the public.) The information in the database is accessible to federal, state and local governmental agencies under certain circumstances.

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.