The New York State Assembly passed the LLC Transparency Act, and if New York Gov. Kathy Hochul signs the bill, the new law will aim to thwart crime and corruption by ending the practice of anonymous ownership for limited liability companies (LLCs). The New York LLC Transparency Act is based on the U.S. Corporate Transparency Act (CTA) enacted in 2021 and incorporates its definitions of statutory terms and provides disclosure relief for exempt companies. The New York Transparency Act establishes a searchable public database to disclose identifying information of ultimate beneficial owners (UBOs), but it far exceeds federal CTA standards.

New York’s Beneficial Ownership Disclosure

Who is Affected?

The New York law requires disclosure of UBOs when the LLC is formed in the state or registered to do business in New York. It requires the state to set up a database so the public can search for owners and companies. This can be done either through amended applications or by filing initial reports with FinCEN.

Implementation

The law would take effect one year after being signed into law. While existing LLCs may receive a one-year reporting extension for CTA requirements, those existing LLCs would still need to comply with the New York bill by Jan. 1, 2025. UBOs may apply for a waiver to protect privacy interests, but the criteria for granting waivers are limited, and few companies might qualify for an exemption from disclosure. It is anticipated that financial institutions will incorporate compliance with the bill into their know-your-customer and anti-money laundering procedures.

Enforcement of the New York LLC Transparency Act

The new law imposes stringent conditions, such as including a statement in an LLC's articles of organization that it is exempt from disclosure, potentially prompting businesses to consider other jurisdictions for operations. Failure to disclose UBO data after two years will result in a "delinquency" from the New York Department of State, which carries a $250 fine and removal of company information from state records. State regulations are expected to further define the meaning of delinquency.

Investors will need to consider disclosure rules to best determine jurisdictions for conducting business, including property investments and compliance requirements. Entities organized outside of New York and pursuing business in the state should consult with counsel to ensure compliance with the new law and understand the interaction of beneficial ownership reporting rules under both FinCEN and New York State disclosure regimes.

Overview of CTA

The CTA requires certain entities (“reporting companies”) to file a report with the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) that identifies the entities’ ultimate individual beneficial owners who have substantial ownership interests or can or do exercise substantial control and is accessible by law enforcement and not by the public.

Exempt Entities

The CTA excludes a variety of 23 distinct entities, including registered investment firms, venture capital fund advisors, broker-dealers, pooled investment vehicles and securities reporting issuers, among others, from its definition of a “reporting company.” For a comprehensive list of entities not required to register under the CTA, click here.

Many of these exempted organizations are already under significant oversight from either federal or state authorities and are often mandated to disclose their ownership details to relevant governmental bodies.

For More Information

CBIZ will continue to monitor developments and impacts in this area. Watch for updates on final regulations. For more information or questions related to the New York LLC Transparency Act or the CTA, please connect with us.

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