What this is: New York has enacted a beneficial ownership reporting law impacting limited liability companies (LLCs).
What this means: LLCs formed or qualified to do business in New York will need to report their “beneficial ownership” information to the New York Department of State (DOS).
On December 22, 2023, New York Governor Kathy Hochul signed S.995B/A.3484, the LLC Transparency Act (“the Act”), into law. The Act takes effect on December 21, 2024, (the “effective date”) and existing LLCs have until January 1, 2025 to comply with its requirements. The Act requires both domestic and foreign qualified LLCs to file a Beneficial Ownership Information (BOI) report with the New York DOS disclosing the names of each LLC’s “beneficial owners” and other information. The DOS will store the BOI in a database. The Act’s definition of “beneficial owners” and some other key terms mirrors the language of the federal Corporate Transparency Act and its implementing regulations (collectively the “CTA”). While some information in the database will be in the public record, other aspects will only be available to law enforcement. Let’s examine some key details of the Act as it compares to the CTA.
Key Terms
The Act states that the term “beneficial owner” shall have the same meaning as that term is defined in the CTA. Specifically, a “beneficial owner” is any individual who, directly or indirectly, either exercises substantial control over the LLC or owns or controls at least 25% of its ownership interests. The Act also states that the term “reporting company” has the same meaning as the CTA’s definition, except that it only includes LLCs (both domestic and foreign), and not the other entity types included in the CTA. “Exempt company” under the Act means an LLC that meets the requirements for one or more of the 23 exemptions enumerated under the CTA.
Content of Beneficial Ownership Disclosure
The BOI report filed with the DOS must contain the following information about the LLC’s beneficial owners: The individual’s name, date of birth, address and unique identifying number from an acceptable identification document. This is the same information about each beneficial owner that is required in the CTA’s BOI report, except that (a.) the address of each beneficial owner can be the individual’s business address, rather than their residential address as is required by the CTA and (b.) unlike the CTA, the Act does not require a scanned image of each beneficial owner’s unique identifying document. In addition, the Act does not include the CTA’s requirement that certain reporting companies provide information about their "Company Applicants;" that is, specific individuals involved in forming the reporting company, as defined in the CTA.
Exemptions and Exemption Filings
The Act provides for the same 23 exemptions to the BOI reporting requirements as does the CTA. Unlike the CTA, which does not require exempt reporting companies to make an exemption filing, the Act requires reporting companies claiming exemptions to submit a filing certifying that the entity is exempt.
If you still have questions, stop by our Corporate Transparency Act resource center and have a look around for informative articles, webinars and even a CTA Exemption wizard.
Due Dates for Beneficial Ownership Disclosure
For non-exempt LLCs formed after the effective date, the LLC must file its BOI report when filing its articles of organization or any amendments to those articles.
For non-exempt LLCs formed on or before the effective date, the LLC must file its BOI report no later than January 1, 2025.
For non-exempt foreign LLCs registered to do business in New York after the effective date, the LLC must file its BOI report when filing its application for authority to transact business.
For non-exempt foreign LLCs registered on or before the effective date, the LLC must file its BOI report no later than January 1, 2025.
Updated reports must be filed within 90 days of a change in information included in the initial BOI report.
Forms
The DOS has not yet issued forms for BOI reports or exemption filings. The Act states that a reporting company can submit a copy of a BOI report filed with FinCEN, as long as it contains all of the information required under the Act.
Accessibility and Confidentiality
The Secretary of State will store the BOI in a database and make some of the BOI available to the public via its website, including information about the LLC itself, as well as the full legal name of its beneficial owners. Other information contained in a BOI report, including certain personal identifying information (“PII”) about the beneficial owners, is to be kept private and available only to law enforcement or in conjunction with a court order. In addition, under certain circumstances, a beneficial owner may apply for a waiver to withhold their PII.
Penalties for Non-Compliance
Both the CTA and the Act impose penalties for non-compliance, but those penalties differ. Under the Act, non-exempt LLCs that are non-compliant with the BOI reporting requirements for more than 2 years will be marked as delinquent in the DOS’s records. To remove the delinquency, the non-compliant LLC must pay a $250 civil penalty and file an up-to-date BOI report. The CTA imposes more severe penalties, both civil and criminal.
Bear in mind that non-exempt LLCs formed or doing business in New York must comply with both the CTA and the Act, not one or the other.
What’s Next?
There is pending legislation in New York that seeks to modify the existing Act. If that pending legislation is enacted, it would make significant changes to the existing Act, including the addition of more severe penalties for non-compliance.
For further information on the Act, please see: NY State Senate Bill 2023-S995B (nysenate.gov)
For further information on the CTA, please see our CTA Resources Page.
This content is provided for informational purposes only and should not be considered, or relied upon, as legal advice.
