June 23, 2023
Client Alert
By: Bradley Kulman, Karen Scanna
The New York State Senate and Assembly have approved a bill known as the LLC Transparency Act (the “LLC Act”)[1] that, if signed into law by Governor Kathy Hochul, will amend the New York Limited Liability Company Law to require disclosure of beneficial owners of a limited liability company (“LLC”) formed, or qualified to do business, in New York. This new bill builds on previous efforts to require the disclosure of LLC members and managers involved in real estate transactions in New York and follows closely on the heels of the federal Corporate Transparency Act (the “CTA”)[2], which takes effect on January 1, 2024. We have discussed this in detail in prior Stroock Client Alerts (see here and here) and in our recent conversation with Commercial Observer. If passed, the LLC Act will become effective 365 days after becoming law.
Similar to the purposes behind the CTA, the bill aims to curb illicit activities such as the funding of terrorist organizations, money laundering, tax evasion and campaign finance violations. In particular, the sponsors of the legislation are focused on anonymous owners of real estate and the purported higher number of code violations and evictions as compared to non-corporate owners. While the required disclosures, filing deadlines and permitted exemptions will be substantially identical to those contained in the CTA, there are a few key differences between the two acts. First, the LLC Act applies only to limited liability companies, while the CTA applies to virtually all types of business entities. Second, the penalty for failing to timely report under the LLC Act appears to be less onerous than the corresponding penalty under the CTA. Third, and perhaps most significant, while the CTA requires the Financial Crimes Enforcement Network to maintain collected information in a confidential, secure and non-public database, the LLC Act creates a publicly available database on the Secretary of State’s website which will contain, among other things, the name of the LLC, the business address of the LLC and the full name of each beneficial owner of the LLC. Although the bill contemplates that the Secretary of State will establish procedures to allow a beneficial owner to apply for a waiver to withhold their name and/or business address, the onus will be on the beneficial owner to demonstrate that a significant privacy interest exists.
Stroock will continue to monitor developments on the LLC Act and will provide updates when appropriate.
[1] Senate Bill S00995B, Assembly Bill A3484A.
[2] Pub. L. No. 116-283 (Jan. 1, 2021) #6403; 31 USC #5336.
June 23, 2023
Client Alert
By: Bradley Kulman, Karen Scanna
The New York State Senate and Assembly have approved a bill known as the LLC Transparency Act (the “LLC Act”)[1] that, if signed into law by Governor Kathy Hochul, will amend the New York Limited Liability Company Law to require disclosure of beneficial owners of a limited liability company (“LLC”) formed, or qualified to do business, in New York. This new bill builds on previous efforts to require the disclosure of LLC members and managers involved in real estate transactions in New York and follows closely on the heels of the federal Corporate Transparency Act (the “CTA”)[2], which takes effect on January 1, 2024. We have discussed this in detail in prior Stroock Client Alerts (see here and here) and in our recent conversation with Commercial Observer. If passed, the LLC Act will become effective 365 days after becoming law.
Similar to the purposes behind the CTA, the bill aims to curb illicit activities such as the funding of terrorist organizations, money laundering, tax evasion and campaign finance violations. In particular, the sponsors of the legislation are focused on anonymous owners of real estate and the purported higher number of code violations and evictions as compared to non-corporate owners. While the required disclosures, filing deadlines and permitted exemptions will be substantially identical to those contained in the CTA, there are a few key differences between the two acts. First, the LLC Act applies only to limited liability companies, while the CTA applies to virtually all types of business entities. Second, the penalty for failing to timely report under the LLC Act appears to be less onerous than the corresponding penalty under the CTA. Third, and perhaps most significant, while the CTA requires the Financial Crimes Enforcement Network to maintain collected information in a confidential, secure and non-public database, the LLC Act creates a publicly available database on the Secretary of State’s website which will contain, among other things, the name of the LLC, the business address of the LLC and the full name of each beneficial owner of the LLC. Although the bill contemplates that the Secretary of State will establish procedures to allow a beneficial owner to apply for a waiver to withhold their name and/or business address, the onus will be on the beneficial owner to demonstrate that a significant privacy interest exists.
Stroock will continue to monitor developments on the LLC Act and will provide updates when appropriate.
[1] Senate Bill S00995B, Assembly Bill A3484A.
[2] Pub. L. No. 116-283 (Jan. 1, 2021) #6403; 31 USC #5336.
