The New York State Senate and Assembly have given the green light to the LLC Transparency Act (referred to as the “LLC Act”), which, if Governor Kathy Hochul signs it into law, will bring changes to the New York Limited Liability Company Law. These changes will mandate the disclosure of the individuals who benefit from a limited liability company (LLC) established or authorized to operate in New York. This new legislation builds upon previous attempts to make LLC members and managers involved in real estate transactions in New York more transparent. It comes closely on the heels of the federal Corporate Transparency Act (known as the “CTA”), which will come into effect on January 1, 2024.

Purpose of the LLC Transparency Act

Much like the goals of the CTA, this bill aims to combat unlawful activities such as financing terrorist organizations, money laundering, tax evasion, and violations of campaign finance laws. Specifically, the bill’s sponsors are concerned about undisclosed owners of real estate and the alleged higher incidence of building code violations and evictions among corporate property owners.

Differences from the Corporate Transparency (CTA)

While the requirements for disclosure, filing deadlines, and allowable exemptions will closely mirror those outlined in the CTA, there are a few key distinctions between the two acts. Firstly, the LLC Act pertains exclusively to limited liability companies, whereas the CTA covers nearly all types of business entities. Secondly, the penalties for failing to report on time under the LLC Act seem to be less severe than the corresponding penalties under the CTA. Thirdly, and perhaps most significantly, the CTA mandates that the Financial Crimes Enforcement Network maintain the collected information in a confidential, secure, and non-public database. In contrast, the LLC Transparency Act establishes a publicly accessible database on the Secretary of State’s website. This database will include details like the LLC’s name, its business address, and the full names of all individuals who benefit from the LLC.

Although the bill anticipates that the Secretary of State will develop procedures to allow a beneficial owner to request withholding of their name and business address, the burden will be on the beneficial owner to demonstrate a substantial privacy interest.

If you have questions about compliance with this requirement, Call the Wright Law Firm to discuss this at (212) 619-1500.