On March 1, 2024, New York Governor Kathy Hochul signed an
amended version of the New York LLC Transparency Act (NYLTA), which
was originally signed with provisions for amendments in December
2023.1 The NYLTA will go into effect on January 1, 2026
(Effective Date), and it will impose certain beneficial ownership
disclosure requirements for limited liability companies (LLCs)
formed or authorized to do business in New York. The NYLTA
cross-references and mirrors in many respects the federal Corporate
Transparency Act (CTA), which went into effect on January 1,
2024.2 For more information, see our CTA overview here. While there are important commonalities
between the two laws, there are also key differences that LLCs
formed or authorized to do business in New York should be aware of.
The NYLTA is the first state corporate transparency law to be
enacted, but similar laws have been proposed in California and
Massachusetts.
Reporting Obligations
Under the NYLTA, all existing and newly formed LLCs formed or
authorized to do business in New York are considered reporting
companies (reporting LLCs), required to report beneficial ownership
information (BOI) to the New York Department of State (NY DoS). The
NYLTA incorporates the 23 reporting exemptions from the CTA. If the
reporting LLC qualifies for one of the 23 exemptions under the CTA,
it must file an attestation of exemption, with a statement citing
the specific exemption claimed and the facts on which the exemption
is based and attesting to its accuracy under penalty of
perjury.
Absent a qualifying CTA exemption, a reporting LLC must file a
disclosure statement with the NY DoS disclosing information
regarding each of its “beneficial owners” and
“applicants.” The terms “beneficial owner” and
“applicant” have the same meanings that the terms
“beneficial owner” and “company applicant” have
under the CTA with respect to reporting LLCs. A nonexempt reporting
LLC must disclose the following information regarding its
beneficial owners to the NY DoS: (1) full legal name; (2) date of
birth; (3) business address; and (4) a unique identifying number
from an acceptable verification document, such as an unexpired
state driver’s license, passport, or state identification card
or document. The NYLTA does not specify the information
requirements for the reporting company, but we expect that similar
information required under the CTA will be required by the NY
DoS.
While the initial legislative proposal would have created a
public database, information collected by the NY DoS will not be
shared publicly. The information will be collected and stored
in an internal database that is accessible to federal, state, and
local government agencies to the extent necessary for the
performance of official duties.
Timing of Filing
Reporting LLCs formed or authorized to do business before the
NYLTA Effective Date will have until January 1, 2027, to make their
initial disclosure filings or attestations of exemptions. Reporting
LLCs formed or authorized to do business between January 1, 2026,
and December 31, 2027, will have 30 days to file their initial
disclosure statements or attestations of exemption.
A reporting LLC will also have an obligation to annually file:
(1) a statement confirming or updating its beneficial ownership
disclosure information (the street address of its principal
executive office and the status as exempt company, if applicable,
as well as other information as may be designated by the NY DoS);
or (2) an attestation of exemption.
Liability Provisions
The NYLTA makes it unlawful for any person to knowingly provide,
or attempt to provide, false or fraudulent BOI. There is a safe
harbor in place for persons who correct an inaccuracy in a
previously filed disclosure statement or attestation of exemption
containing inaccurate information within 90 days of the inaccurate
submission, so long as the false or fraudulent information was not
willfully submitted for the purpose of evading the law.
Any reporting LLC that fails to file its beneficial ownership
disclosure, attestation of exemption, or annual statement for a
period exceeding 30 days will be shown as past due on the records
of the NY DoS, and the attorney general may assess a fine of up to
$500 for each day the company has been past due. Any reporting LLC
that fails to make such filings for a period exceeding two years
will be shown as delinquent and may be assessed a penalty of up to
$500 for each day a company has been past due or delinquent. Such
delinquency status shall be removed upon the filing of the current
report, the payment of a $250 fine, and verification from the
attorney general that any penalties imposed have been paid.
If a reporting LLC fails to file its beneficial ownership
disclosure or attestation of exemption, the NY DoS, with at least
30 days’ notice, may deem the reporting LLC suspended and
prohibited from conducting business in New York until such filing
has been made. Additionally, the New York attorney general is
authorized to bring an action to dissolve or cancel any LLC, or to
annul an LLC’s authorization to do business in New York, if a
reporting LLC is delinquent in filing its beneficial ownership
disclosure or attestation of exemption, or it knowingly provides or
attempts to provide false or fraudulent BOI.
Differences Between the CTA and NYLTA
The NYLTA was modeled after the CTA, and the two acts overlap in
several important respects, such as key definitions (such as those
for beneficial owner, reporting company, and exempt company) and
reporting exemptions. To date, the U.S. Department of the
Treasury’s Financial Crimes Enforcement Network (FinCEN) has
published two rulemakings relating to CTA reporting and CTA access,
as well as additional guidance in the form of frequently asked
questions and a compliance guide. The NYLTA has just been enacted
and provides that the secretary of state may promulgate regulations
necessary to effectuate the provisions of this article. The NYLTA
also highlights certain areas where additional direction from the
NY DoS may be forthcoming, including with regard to initial and
annual reporting requirements, provisions for sharing information
with agencies permitted access, and designated forms.
That being said, there are some notable differences between the
CTA and the NYLTA that companies should be aware of:
- Applicability. While the CTA applies to all
U.S. entities, including corporations, LLCs, and limited
partnerships, the NYLTA only applies to LLCs organized under or
authorized to do business in the state of New York. - Reporting exemption attestation. The NYLTA
requires an LLC that believes it is exempt to file an attestation
of exemption with the NY DoS, indicating which of the 23 exemptions
in the CTA it wishes to qualify for and the annual reporting
requirement, including the status as an exempt company, if
applicable. The CTA has no requirement for an exemption attestation
or an annual report on exemption status. - Annual reporting. Unlike the NYLTA, the CTA
does not require annual reporting and requires updated and
corrected reports when certain information changes or needs to be
corrected. - Timing. Under the CTA, entities formed between
January 1, 2024, and December 31, 2024, will have 90 days to file
their initial reports in 2024. Entities formed after January 1,
2025, will have 30 days to report. Under the NYLTA, LLCs formed or
authorized on or before the Effective Date will have until January
1, 2027, to make their initial filing. LLCs formed or authorized to
do business after the Effective Date must file the initial
beneficial ownership disclosure or attestation of exemption within
30 days of formation or authorization. So there is plenty of time
for LLCs formed or authorized to do business in New York to collect
and file the required information reports. - Reportable information. There is no
requirement in the NYLTA to provide an image of the document from
which the unique identifying number is derived, unlike under the
CTA. The CTA also prescribes information requirements for the
reporting company, including specific information such as trade
name or “doing business as” name and principal place of
business or primary location where the reporting company conducts
business. The NYLTA does not (yet) specifically address disclosure
requirements for the reporting company; however, it does defer
disclosure requirements to the form and manner prescribed by the NY
DoS, which we expect to include reporting LLC information similar
to the CTA. - Accessibility. The NYLTA allows access to the
information collected to federal, state, and local government
agencies to the extent necessary for the agency to perform its
official duties, to operate a program specifically authorized by
law, or for a valid law enforcement purpose. Under the CTA, access
to the FinCEN database is much more restricted and subject to a
prescriptive access rule that authorizes FinCEN to disclose BOI
under specific circumstances to six categories of recipients, and
each recipient is subject to specific security and confidentiality
requirements to protect the security and confidentiality of
BOI. - Identifiers. The CTA allows individuals to
obtain FinCEN IDs from FinCEN to be used in lieu of the personal
identifying information required to be reported on beneficial
ownership reports. The NYLTA does not address or permit the use of
identifiers. - Penalties. The penalties for noncompliance
with the NYLTA are not as severe as those under the CTA. Reporting
LLCs that fail to file a BOI report or attestation of exemption for
over 30 days will be marked as past due and, after two years, will
be marked as delinquent on the records of the NY DoS and would most
likely be unable to obtain a certificate of good standing. The
delinquency can be remedied by filing a BOI report or attestation
of exemption and paying a civil penalty of $250. The CTA, on the
other hand, provides for criminal penalties of up to two years
imprisonment for reporting violations; the NYLTA does not impose
any criminal penalties. However, the CTA caps daily specified
penalty amounts at $10,000 in the aggregate, and the NYLTA does not
impose any aggregate penalty caps on its daily specified penalty
amounts.
Other State Initiatives
In addition to New York, other states are also considering
imposing beneficial ownership disclosure requirements.
- California. The California Senate is currently
considering a bill that would require foreign corporations and LLCs
that register with the California Secretary of State to do business
in the state to disclose BOI. The bill defines “beneficial
owner” as “a natural person who owns, directly or
indirectly, 50% or more of the equity interest of a foreign
corporation or foreign LLC.” Companies would be required to
disclose each beneficial owner’s (1) full legal name; (2)
residential or business address; and (3) email address, if
applicable.3 - Massachusetts. The Massachusetts House of
Representatives introduced a bill in March 2023 proposing
disclosure of beneficial ownership of both domestic and foreign
LLCs.4 - Pennsylvania. Pennsylvania has adopted Act
122, establishing a new annual corporate reporting regime that will
require all domestic corporations, domestic limited liability
partnerships, domestic electing partnerships, and foreign entities
registered to do business in Pennsylvania to provide the name of
governors/directors and the names and titles of principal officers
(if any), among other information, along with their annual
registration statement. Entities must first file such reports the
year after they become subject to Act 122. The Act is effective as
of January 3, 2024, so reports will not be due until
2025.5 The Pennsylvania law is a partial transparency
regime, as it does not require information on equity ownership,
focusing instead on those in positions of control.
Takeaways
LLCs formed under New York law and foreign LLCs authorized to do
business in New York should be aware that, starting January 1,
2026, they will likely face parallel beneficial ownership reporting
obligations under the CTA and the NYLTA. Reporting LLCs should be
aware of the key differences between the CTA and the NYLTA
reporting requirements. Reporting LLCs who believe they qualify for
an exemption under NYLTA will need to file an initial and annual
attestation to this effect with the NY DoS, citing the specific
exemption for which they believe they qualify and the facts upon
which such exemption is based.
As a result, companies currently conducting reviews of their CTA
exemptions for FinCEN filings should document the rationale for the
exemption in their files so that they can more easily identify and
file exemption justifications for purposes of these NYLTA
requirements. In addition, companies that are developing CTA
policies and procedures should incorporate applicable state laws
into their policies or, at a minimum, include a placeholder
acknowledging the potential application of state laws of similar
substance. Annual filing requirements and other unique aspects of
state laws will need to be integrated into these policies and
procedures as appropriate.
Companies should also monitor similar legislative efforts in
other states, such as Massachusetts and California. Other states
may soon follow suit with their own reporting regimes, adding to
the complexity of existing compliance obligations for
companies.
We expect that the NY DoS will issue regulations and additional
clarifying information to implement this comprehensive reporting
regime and that more states will join New York and pass similar
legislation. We will publish further Updates as more developments
in these areas unfold.
Footnotes
1. New York Senate Bill 995-B (enacted December 22, 2023),
as amended by Chapter Amendment on March 1, 2024 (Senate Bill 8059/Assembly Bill 8544). The 2024
Chapter Amendment changed the effective date of the NYLTA to
January 1, 2026, and prior to the 2024 Chapter Amendment, the NYLTA
allowed a reporting LLC to submit to the NY DoS a copy of its CTA
report filed with FinCEN. Under the amended act, submitting the
federal beneficial ownership information report filed with FinCEN
will no longer satisfy the NYLTA reporting
requirements.
2. Title LXIV of the William M. (Mac) Thornberry
National Defense Authorization Act for Fiscal Year 2021, Public Law
116-283 (January 1, 2021) (the NDAA). Division F of the NDAA
is the Anti-Money Laundering Act of 2020, which includes the
CTA.
3. SB-738, as amended March 21, 2023.
4. H.3566, 193 Gen. Ct. (Ma. 2023).
5. Act of November 3, 2022, P.L. 1971, No.
122.
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.
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