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This past Summer, the New York Legislature passed a bill (AO3484), known as the LLC Transparency Act, that would require limited liability companies (LLC) to disclose information about their beneficial owners at the time of formation or qualification to do business in New York. Such ownership information would be publicly available in a searchable database. Although the LLC Transparency Act will not become law unless and until Governor Hochul signs the bill, if signed, the law will take effect one year thereafter.  LLC owners are therefore advised to stay abreast of disclosure requirements as they are made available. 

What is the New York LLC Transparency Act?

New York’s bill is modeled after the federal Corporate Transparency Act (“CTA”), which goes into effect on January 1, 2024, but, unlike the Corporate Transparency Act, New York’s bill only applies to limited liability companies. With the LLC Transparency Act, the New York legislature seeks to correct the “public policy mistake” of permitting anonymous LLCs to do business in New York because these anonymous entities “are used to bypass sanctions, avoid taxes, fund terrorist organizations and organized crime, and launder money” and those “leasing real property are correlated with more numerous code violations, higher rents, and more evictions compared to non-corporate owners.” See NY Assembly Bill AO3484.

The proposed legislation’s key defined terms, including “beneficial owner,” incorporate by reference many definitions of those terms in the CTA. Further, exemptions that LLCs can claim are modeled after those found in the CTA. The LLC Transparency Act would also allow reporting companies to use the same report they filed with the federal government for the CTA to satisfy New York’s reporting requirements.

What Does the LLC Transparency Act Mean for LLCs?

If passed into law, the LLC Transparency Act will require newly formed LLCs to provide information regarding beneficial owners when filing the articles of organization and foreign LLCs to file beneficial owner information with the application for authority to do business in New York. Existing domestic and foreign LLCs formed before the effective date of the LLC Transparency Act will have until January 1, 2025, to file an updated beneficial disclosure document. 

Unlike the Corporate Transparency Act, the proposed LLC Transparency Act requires the New York Secretary of State to maintain a publicly available database that includes the name of the business entity, the current business street address, and county associated with each business street address, and the full name(s) of each beneficial owner. Regulations would allow for an exemption process whereby certain beneficial owners citing “significant privacy interests” could apply for a waiver to withhold the name and/or business address associated with a beneficial owner from the database (for example, where a beneficial owner is participating in an address confidentiality program).

Penalty for failure to comply with the proposed LLC Transparency Act is much less stringent than under the Corporate Transparency Act. In the event an LLC fails to file the required beneficial ownership disclosure for a period of more than thirty days, the records of the Department of State will show the report as past due; if the beneficial ownership disclosure has not been filed for a period of more than two years the report shall appear as delinquent. The delinquency will be removed from the Department of State’s records when the LLC files an up-to-date beneficial ownership disclosure form and pays a $250 civil penalty.

If you have questions relating to the Corporate Transparency Act or the proposed New York State LLC Transparency Act, how they might affect your entity or potential planning opportunities, contact MCCM Business Lawyers Mary F. Ognibene at mognibene@mccmlaw.com or 585-512-3520 or Letty Laskowski at llaskowski@mccmlaw.com or 585-512-3538.

This publication is intended as an information source for clients, prospective clients, and colleagues and constitutes attorney advertising. The content should not be considered legal advice and readers should not act upon information in this publication without individualized professional counsel.

About MCCM

McConville Considine Cooman & Morin, P.C. is a full-service law firm based in Rochester, New York, providing high-quality legal services to businesses and individuals since 1979.  With over a dozen attorneys and a full paralegal support staff, the firm is well-positioned to right-size services tailored to each client. We are large enough to provide expertise in a broad range of practice areas, yet small enough to devote prompt, personal attention to our clients.

We represent a diverse range of clients located throughout New York State and New England.  They include individuals, numerous manufacturing and service industry businesses, local governments, and health care professionals, provider groups, facilities and associations. We also serve as local counsel to out-of-state clients and their attorneys who have litigation pending in Western New York courts.  For more information, please contact us at 585.546.2500.