Compliance With The New York LLC Transparency Act Necessary For Many Mintz Clients – Corporate Governance

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.

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.