The New York LLC Transparency Act

By: Jonathan B. Wilson, TAYLOR ENGLISH DUMA LLP AND FINCEN REPORT COMPANY

This article discusses the New York LLC Transparency Act (New York Act), and provides guidance on which entities must file reports thereunder, the information to be included, which entities are exempt from filing reports, and when reporting companies must amend previously filed reports. This note contrasts the New York Act with the federal Corporate Transparency Act (CTA).

The New York LLC Transparency Act

An original version of the New York Act was adopted by the New York Assembly and Senate and signed by Governor Hochul on December 22, 2023 (the “Original Bill”). On March 1, 2024, however, the Governor signed into law amendments to the Original Bill (as thereby amended, the “LTA”).  The Original Bill would have taken effect at the end of 2024, but as amended, the LTA will take effect on January 1, 2026. 

The Corporate Transparency Act

Congress adopted the CTA in late December 2020, as part of the William M. (Mac) Thornberry National Defense Authorization Act for Fiscal Year 2021.¹

The CTA requires companies that are formed or registered to do business in the United States to file a beneficial ownership report with the Financial Crimes Enforcement Network of the U.S. Treasury Department (FinCEN). These beneficial ownership reports will enable FinCEN to assemble a massive database of beneficial ownership information (BOI). FinCEN will use its database to fight money laundering in cooperation with other U.S. law enforcement agencies. Although the FinCEN database will not be publicly available, FinCEN will make the database accessible to U.S. law enforcement agencies, U.S. financial institutions, and some non-U.S. law enforcement agencies pursuant to regulations published in late December 2023 (the Access Rule).²

FinCEN adopted a final rule to implement the beneficial ownership reporting provisions of the CTA on September 30, 2022, (the Reporting Rule)³ that took effect on January 1, 2024. FinCEN amended the final rule on November 8, 2023 to implement rules for the issuance of a FinCEN Identifier, or unique identification number, to individuals who anticipate being the subject of numerous BOI reports.⁴ FinCEN issued a second amendment on November 30, 2022, so that reporting companies formed (or registered) on or after January 1, 2024 (but before January 1, 2025) would have 90 days from the date of formation (or registration) to file an initial report (instead of 30 days as contemplated in the original Reporting Rule).⁵

The CTA, as implemented by FinCEN through the Reporting Rule, establishes a series of obligations for companies formed or registered to do business in the United States.

Summary of CTA Requirements

The CTA, through the Reporting Rule, requires any reporting company created (or registered) on or after January 1, 2024 (but before January 1, 2025) to file a report within 90 calendar days of the earlier of the date on which it receives actual notice that its creation has become effective or the date on which a secretary of state or similar office first provides public notice, such as through a publicly accessible registry, that the domestic reporting company has been created.⁶

Entities that become reporting companies on or after January 1, 2025, will have only 30 calendar days from the date of formation (or registration) to file an initial report.

In contrast, reporting companies created (or registered) before January 1, 2024, must file an initial report not later than January 1, 2025.⁷

Each reporting company that is not exempt must identify in its initial beneficial ownership report, each of its “beneficial owners,” and provide five pieces of personally identifiable information about each of those beneficial owners.⁸ In addition, the initial beneficial ownership report must disclose the reporting company’s full legal name, any trade name or “doing business as” name, a complete current address, the state or jurisdictions of the reporting company’s formation, and the reporting company’s taxpayer identification number (TIN), including an Employer Identification Number or, where a foreign reporting company has not been issued a TIN, a tax identification number issued by a foreign jurisdiction and the name of that jurisdiction.⁹

For each beneficial owner of the reporting company, the reporting company must disclose in its initial report each beneficial owner’s (A) full legal name; (B) date of birth;
(C) residential street address; (D) a unique identifying number (which may be a non-expired U.S. passport, a non-expired identification document, such as a driver’s license, issued by a state, local government or Indian tribe, or a non-expired passport issued by a foreign government if the individual does not possess any of the other document types listed); and (E) an image file of the document that provides the unique identifying number.¹⁰

In addition, for reporting companies that are formed (or registered to do business in the United States) after January 1, 2024, the initial beneficial ownership report must also include these same five pieces of information for the reporting company’s “company applicant.” The Reporting Rule defines “company applicant” as (a) with respect to a domestic reporting company, “the individual who directly files the document that creates the domestic reporting company,” and (b) with respect to a foreign reporting company, “the individual who directly files the document that first registers the foreign reporting company.”¹¹

If there is more than one individual responsible for the filing of the document that forms the domestic reporting company (or that registers the foreign reporting company to do business in the United States), the “company applicant” is also the individual “who is primarily responsible.”¹²

After a reporting company files its first beneficial ownership report, the company must amend its report within 30 calendar days after there is any change to the information required in that report.¹³

The CTA exempts from the obligation to file a beneficial ownership report any reporting company that falls into any of 23 exemption categories.¹⁴ The exemption categories cover several classes of entity that are the subject of extensive regulation or that are otherwise required by law to disclose their ownership information to the government.

The CTA contains serious penalties for non-compliance. A reporting company that fails to file a beneficial ownership report (or a required amendment) when due is subject to a
$500-per-day fine up to a maximum of $10,000. A willful failure to file a report when due or an intentional filing of inaccurate information is punishable as a felony by up to two years imprisonment. A willful violation in combination with other anti-money laundering violations can result in an amplified penalty of up to 10 years imprisonment.

The LTA

Key Definitions

The Original Bill was adopted in the New York Assembly as Assembly Bill A3484A,¹⁵ in the Senate as Senate Bill S995B,¹⁶ and was signed by the Governor on December 22, 2023. As part of the Governor's agreement to sign the original bill, the legislature was required to adopt certain amendments to address privacy concerns and to extend the implementation date. The legislature responded with the revised version of the LTA adopted on March 1, 2024 (the “2024 Amendment”).

As amended, the LTA amends New York's Limited Liability Company Law (N.Y. Ltd. Liab. Co. Law § 101 et seq.)¹⁷ and its Executive Law (N.Y. Exec. Law § 1 et seq.).¹⁸ Section 1 of the LTA (amending NY CLS LLC § 102) adds definitions to the New York Limited Liability Company Law for the terms "beneficial owner," "initial report," "reporting company," and "exempt company."¹⁹ The terms "beneficial owner" and "reporting company" refer to the definitions provided in the CTA and its implementing regulation.

The term “initial report” refers to the report “required to be filed” pursuant to the Reporting Rule. This is somewhat ambiguous because the Reporting Rule requires a reporting company to file an initial report and also an amendment within 30 days after certain events. Both the initial report and any subsequent amendment are “required to be filed” under the Reporting Rule.

The term “exempt company” refers to a “limited liability company or foreign limited liability company not otherwise defined as a reporting company that meets a condition for exemption enumerated in” the CTA. This definition also contains ambiguity for a foreign reporting company (a term defined in the CTA), to the extent it suggests that there may be a foreign reporting company, that is not a limited liability company but that should be treated as such because it is “not otherwise defined as a reporting company.” The CTA defines “foreign reporting company” as “a corporation, limited liability company, or other entity, formed under the law of a foreign country, and registered to do business in any State or tribal jurisdiction by the filing of a document with a secretary of state or any similar office under the law of a State or Indian tribe.”²⁰ The CTA definition does not provide for entities to be “otherwise defined as a reporting company.”

For additional practical guidance related to the requirements of the New York LTA, please follow this link to read the complete article.

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Conclusion

LLCs that are subject to the LTA will likely require the assistance of counsel to understand the LTA’s requirements. The LTA’s requirements are complex and can become confusing in comparison to an LLC’s obligations under the CTA. LLCs that are subject to the LTA may also find compliance difficult because of the differing deadlines and definitions that arise under the LTA and the CTA. To assist companies and their beneficial owners in managing CTA and LTA compliance, while maintaining the secrecy and integrity of their confidential data, companies and their counsel may want to explore third-party tools like those provided by the FinCEN Report Company. 

Jonathan B. Wilson is a partner and member of the Corporate and Business Department at Taylor English Duma, LLP. His practice includes corporate securities, corporate finance and governance, mergers and acquisitions, and intellectual property. He represents Fortune 100, middle-market, and start-up companies. Jonathan has more than 30 years of experience as an in-house lawyer, business adviser, and strategist helping business executives and owners achieve negotiated solutions to technology and financial transactions.

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Related Content

1. Pub. L. No. 116-283, 134 Stat. 3388 (Jan. 1, 2021). 2. Beneficial Ownership Information Access and Safeguards, 88 Fed. Reg. 88,732 (Dec. 22, 2023), to be codified at 31 C.F.R. § 1010.955. 3. Beneficial Ownership Information Reporting Requirements, 87 Fed. Reg. 59,498 (Sept. 30, 2022). 4. Use of FinCEN Identifiers for Reporting Beneficial Ownership Information of Entities, 88 Fed. Reg. 76,995 (Nov. 8, 2023). 5. Beneficial Ownership Information Reporting Deadline Extension for Reporting Companies Created or Registered in 2024, 88 Fed. Reg. 83,499 (Nov. 30, 2023.) 6. 31 C.F.R. § 1010.380(a)(1)(i). 7. 31 C.F.R. § 1010.380(a)(1)(iii). 8. 31 C.F.R. § 1010.380(b). 9. 31 C.F.R. § 1010.380(b)(1)(i). 10. 31 C.F.R. § 1010.380(b)(1)(ii). 11. 31 C.F.R. § 1010.380(e). 12. 31 C.F.R. § 1010.380(e)(3). 13. 31 C.F.R. § 1010.380(a)(2). 14. 31 C.F.R. § 1010.380(c)(2). 15. 2023 Bill Text NY A.B. 3484. 16. 2023 Bill Tracking NY S.B. 995. 17. N.Y. Ltd. Liab. Co. Law § 101 et seq. 18. N.Y. Exec. Law § 1 et seq. 19. Section 1 of the LTA amended N.Y. Ltd. Liab. Co. Law § 102. 20. 31 C.F.R. § 1010.380(c)(2)(ii).