What is New York’s LLC Transparency Act?
The New York State Assembly passed the LLC transparency act on June 20, 2023. This legislation requires the disclosure of owners of an LLC in New York upon its formation. This bill not only affects new LLCs, but operating LLCs and foreign LLCs doing business in New York are also required to disclose the identity of their beneficial owners. LLC beneficial owners are any owners with significant control over the company. The bill also establishes a searchable public database with the names of the LLC beneficial owners. The goal of the act is to make beneficial ownership information broadly available to the public. There is a provision allowing owners with significant privacy interests to keep their name or address confidential. However, there is a high standard to prove these interests.
What are New York LLCs required to do under the new legislation?
LLCs operating in New York will have to file a beneficial ownership disclosure including the beneficial owner’s full legal name, date of birth, current business street address, and an identification number. The names of the owners and business addresses will be included on the public database. If a New York LLC fails to file the disclosure within two years, it will be given a 60-day period in which it must file or be recorded as delinquent by the Secretary of State.
What is the basis of the LLC transparency act?
The LLC transparency act is modeled after the federal Corporate Transparency Act. This act was part of the Anti-Money Laundering Act passed in 2020. Both of these acts are intended to fight financial crimes. However, the New York Act goes further than the Corporate Transparency Act in that it requires the secretary of state to maintain a public database.
Why did New York pass the LLC transparency act?
New York wants LLC ownership information to be available to tax and law enforcement entities in the state. The law permitting LLCs to operate anonymously led to a proliferation of shell companies in New York that led to more financial crimes. These companies are used to bypass sanctions, avoid taxes, launder money, and even to fund organized crime and terrorist organizations.
