Ready for More Corporate Transparency? Understanding the NY LLCTA

Despite the fact that its constitutionality is currently in legal limbo, the federal Corporate Transparency Act has already had an impact rippling through a number of business sectors, thanks in no small part to the wave of state-level ownership disclosure laws it has inspired. One of the more significant of these emerging state laws is the New York LLC Transparency Act (NY LLCTA).

The NY LLCTA has been the subject of its own drama, with Governor Kathy Hochul conditioning her approval on the state legislature’s removal of the original bill’s public database component, which specified that the beneficial owners of LLCs incorporated or authorized to do business in the State of New York would be listed on a publicly accessible database. The much-criticized requirement, however, was removed in favor of a database that will be accessible only to law enforcement, government agencies and certain financial institutions. The NY LLCTA was thus signed into law on March 1, 2024.

Though the initial drafting and drama surrounding the bill garnered justifiable concerns over what would be required of businesses either based in or doing business in New York, there is now, thankfully, a degree of clarity that businesses can use to position themselves in the best possible manner.

When Does the NY LLCTA Take Effect?

The original legislation stipulated that the NY LLCTA would go into effect on December 21, 2024. However, thanks to the superseding law that addressed the public database issue, the effective date has now been delayed until January 1, 2026.

This gives businesses a head start on making sure they take the appropriate steps to ensure compliance.

To Whom Does the NY LLCTA Apply?

The NY LLCTA applies to entities that fall under the law’s definition of a “reporting company.” Under the law, a “reporting company” is a limited liability company or foreign limited liability company that is created by the filing of a document with the New York Department of State (NYDOS) or has been created in a different jurisdiction but is registered to business in the State of New York.[1] Essentially, if your business is an LLC that was formed in New York or is registered to do business in New York, it is considered a “reporting company” and therefore is subject to the NY LLCTA’s requirements.

What Are the NY LLCTA’s Key Provisions?

The major impact of the NY LLCTA is its required disclosure of beneficial ownership information. LLCs that qualify as “reporting companies” under the NY LLCTA are required to file a beneficial ownership disclosure with the NYDOS. This beneficial ownership disclosure must include disclosure information for the applicant, as well as any direct or indirect “beneficial owner” of the LLC, which is defined with reference to the CTA’s definition of “beneficial owner,” applying to anyone with ownership of at least 25 percent of the outstanding ownership interests and/or the ability to exercise substantial control over the LLC.

The applicant and beneficial owner must disclose: (i) their full legal name, (ii) their date of birth, (iii) their current home or business street address, and (iv) a unique ID number from either an unexpired passport, an unexpired driver’s license or an unexpired identification card issued by a state or local government agency.

LLCs that were either formed in New York or received qualification to do business in New York after January 1, 2026 must file this disclosure within 30 days of its formation or qualification to do business in the state. Those reporting companies formed before January 1, 2026 have until January 1, 2027 to make their initial filing. After making an initial filing, the NY LLCTA requires qualifying reporting companies to file annual statements to confirm or update the beneficial ownership information, the street address of the LLC’s principal place of business or other similar information that may be required by the NYDOS. Corrected reports (submitted corrections to either an initial filing or an annual statement filing that corrects a material substantive mistake) may be filed within 90 days of the submission of the beneficial ownership information.

Are There Exemptions?

The NY LLCTA allows for the 23 exemptions provided in the CTA. Therefore, if an entity is exempt from the CTA, it is also exempt from the NY LLCTA. An important distinction, however, is that the NY LLCTA requires that an exempt company affirmatively attest to the NYDOS that it qualifies for one of the listed exemptions, under penalty of perjury, within 30 days of the LLC’s formation or qualification to do business in New York. Entities that qualify under one of the listed exemptions are not automatically exempted the way they are under the CTA.

What Are the Penalties?

The NY LLCTA imposes stringent penalties for noncompliance. Such penalties can include fines of up to $500 per day for delinquent filings. In particularly grievous cases, or in cases of continuous noncompliance, the NY LLCTA can require the suspension of business activities for noncompliant LLCs. The New York Attorney General can even bring an action to dissolve, cancel or annul authorization to do business for any entity that is delinquent in filing its initial disclosure or attestation of exemption (or that knowingly provides false information in its initial disclosure or attestation of exemption). These strict penalties make it critical to ensure that your business is compliant with the regulations.

Conclusion

Even though the law does not take effect until 2026, organizations that do business in New York should start evaluating whether the NY LLCTA applies to them and, if so, begin to assemble the appropriate materials to ensure compliance. This is especially important because, unlike the CTA, a central repository of beneficial ownership information like the FinCEN ID, where beneficial owners can input their information once and then simply input a reference number moving forward (like a TSA PreCheck for beneficial ownership information), does not exist for beneficial ownership information under the NY LLCTA (at least not yet), so businesses cannot rely on those kinds of qualifications to ensure compliance.

Whatever happens with the CTA, the NY LLCTA does not look like it is going anywhere, so if you do business in New York, consult with your compliance specialist or legal counsel to begin your planning.

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[1] The statute specifically notes that “‘Reporting Company’ shall have the same meaning as defined in 31 USC § 5336(A)(11)(A), as amended, and any regulations promulgated thereunder, but shall only include limited liability companies and foreign limited liability companies.” Section 1(KK), 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).