New York Creates New Disclosure Requirement for LLCs

Posted By Madilyn Moeller, Wednesday, April 17, 2024

New York City

By Patrick O’Brien, JD, General Counsel, American Med Spa Association (AmSpa)

There appears to be a national wave of concern over identifying the owners of small companies. As we recently discussed in this article, the U.S. Department of the Treasury has implemented a new reporting requirement known as the Corporate Transparency Act (CTA) that creates an ownership database for all small businesses. And, recently, New York has decided to implement a similar system, which was adopted initially under Senate Bill 995-B and Assembly Bill 3484A in late 2023 and was then amended by Senate Bill 8059 in March 2024. The new law largely mirrors the requirements of the federal CTA, which went into effect this year. In fact, most of the definitions in the New York law make direct reference to the terms used in the U.S. Code for their meaning.

The basic requirements of the New York law are for New York registered limited liability companies (LLCs) to make a disclosure containing their beneficial ownership information (BOI). In this case, the term “beneficial owner” uses the same definition as the federal CTA law, broadly meaning anyone who has 25% ownership interest or exercises substantial control over the company. Unlike the federal CTA, which includes multiple business entity types, the New York law is limited to LLCs. This includes both those LLCs formed in New York and those that were formed in other states but are registered to do business in New York, which are known as foreign LLCs.

Unless an LLC meets an exemption, it will need to submit an initial beneficial ownership disclosure and an annual statement confirming or updating the information. These disclosures must contain each beneficial owner’s full legal name, date of birth, and current home or business street address, as well as a unique identification number from an unexpired state ID, driver’s license or passport. Like the other definitions, the exemptions are the same as those used in the federal CTA. One significant difference, however, is that if a company is exempt from needing to provide a BOI disclosure, the company must still provide, under penalty of perjury, an attestation to New York indicating the basis for the exemption; these attestations must also be updated annually. In effect, all LLCs will need to make some type of initial filing—either the BOI disclosure or the statement of exemption. Foreign LLCs also need to disclose and update BOI information.

Companies that were already formed and in operation prior to January 1, 2026, have until January 1, 2027, to file their initial BOI report; LLCs formed later than that must file within 30 days of their formation. Failure to make the initial report or exemption attestation or to file the annual updates can result in a number of penalties, including fines up to $500 per day or the company’s suspension.

While the New York law is very similar to the federal CTA, it differs in terms of deadlines and what needs to be disclosed, as well as how it is filed. Any LLC formed in New York or registered to do business there needs to be aware that it now has two reporting requirements related to BOI—under the federal CTA and this New York law. An LLC will want to consult with knowledgeable attorneys and advisors and establish policies and processes to ensure that it is complying with these new requirements.

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