Category: Insights on Home Page

On Dec. 23, 2023, Gov. Hochul signed the New York LLC Transparency Act (NYLTA), and, after some March 2024 amendments to address privacy issues and to extend the implementation date, the law will go into effect on Dec. 21, 2024.¹ While the law is based upon the federal Corporate Transparency Act (CTA), it is not exactly the same in its applicability or reporting.

The NYLTA requires all New York limited liability companies, including exempt LLCs, in existence on Jan. 1, 2026, to file their initial reports on or before Dec. 31, 2026. All New York LLCs that file for formation or registration in New York on or after Jan. 1, 2026, will have thirty days from the date of formation or registration to file initial reports.

The NYLTA also requires LLCs’ beneficial ownership to be reported.^₂ As of now, New York State (NYS) is sending newly-organized entities forms to complete, immediately after creation of the entity, which require submission of the required ownership information to the State.

There are exemptions to the filing requirements and the NYLTA incorporates many of the CTA exemptions into the NYS law, including the “large operating company,” banking, and publicly- traded company exceptions. One difference in claiming an exemption under the NYLTA is that any LLC claiming an exemption must file a sworn attestation each year identifying the exemption and the facts supporting that claimed exemption.³ No such requirement exists under the CTA.

New York LLCs not claiming an exemption must report personal information about their “beneficial owners” and “applicants.”

The NYLTA defines “beneficial owner” as individuals who: (i) own or control at least 25% of the LLC; and/or (ii) exercise substantial control over the LLC,⁴ with “substantial control” being the following:

• Serving as a senior officer of the reporting company, including as CEO, COO, or general counsel;
• Having authority over the appointment or removal of senior officers or a majority of the board of directors;
• Directing, determining, or having substantial influence over important decisions made by the reporting company; or
• Holding any other form of substantial control over the reporting company.

“Applicants” are those persons who filed or directed the filing of papers with the Department of State to form the LLC or register it to do business in New York.

The personal information to be reported about beneficial owners and applicants is:

• Full legal name;
• Date of birth;
• Current home or business street address, as applicable; and
• An identifying number from a government-issued identification (i.e., driver’s license, passport, etc.).⁵

After the initial registration under the NYLTA, LLCs are required to file annual statements confirming or updating the following:

• Beneficial ownership disclosure information (non-exempt LLCs only);
• The street address of the LLC’s principal executive office;
• The LLC’s status as an exempt company, if applicable; and
• Such other information as may be designated by the Department of State.⁶

This differs from the CTA, which requires updating within 30 days of any changes, and reporting will be made electronically to the NYS Department of State.

The information reported is NOT generally available to the public, and all information will be maintained by NYS in a secure database, accessible only:

• At the written request of or by voluntary written consent of the beneficial owner;
• By court order;
• To officers or employees of another federal, state, or local government agency where disclosure is necessary for the agency to perform its official duties as required by statute or necessary to operate a program specifically authorized by law; or
• For a valid law enforcement purpose.⁷

Penalties for non-compliance include:

• Upon 30-days’ notice, automatic “suspension,” meaning the LLC may not conduct business in New York until it becomes compliant;⁸
• The Attorney General may assess a late fee of $500 per day of noncompliance;⁹ and
• The Attorney General may bring an action to dissolve or annul the authority of the non-compliant LLC to do business in New York if that entity remains non-compliant for two years or more.¹⁰

The NYLTA prohibits knowingly providing or attempting to provide false information by any individual, and the New York State Attorney General may bring an action to dissolve or cancel an LLC that provides false information.¹¹

For guidance, please visit our Labor & Employment page or call us at 631-738-9100.

Thank you to Anna Sorto for her research and writing assistance.

1. N.Y. Limited Liab. Co. Law §§ 1106, 1107, and 1108.
2. N.Y. LTD. LIAB. CO. § 1107(d).
3. Id. § 1107(b).
4. Id. § 1106(a); See also Beneficial Ownership Information Reporting Requirements, 31 U.S.C.S. § 5336 (LexisNexis, LEXIS through Pub. L. No. 118-106).
5. Id. § 1107(a).
6. Id. § 1107(g).
7. Id. § 1107(f).
8. Id. § 1108(g).
9. Id. § 1108(a).
10. Id. § 1108(e).
11. Id.

Recently, a New York appellate court found an employer liable for an employee’s injuries that arose from an off-site “happy hour” event.¹

The injured employee,² Bruce A. Matter, was an account executive for Google. He was struck by two motorized bicycles while crossing a street to get to a bus stop to go home after an “invitation-only”³ event, a “SADA & Google Cloud—Happy Hour,” at a local biergarten for the “Google Cloud NYC team.”

At the trial, Google’s representative explained that the purpose of such events is to develop and maintain business relationships between Google’s sales team and business partners, which, in turn, allows a better understanding of different strategies that may be pursued for sales purposes.

The Court reasoned that in order for an injury to be compensable under the New York Workers’ Compensation Law, the injury “must arise both out of and in the course of employment,” which means that injuries sustained during work must be related to the performance of one’s job duties. While “[g]enerally, accidents that occur outside of work hours and in public areas away from the workplace are not compensable,” if “there is a causal nexus between the accident and employment,” those injuries will be compensable under the law.

The Court found that a link between the accident and Matter’s employment was supported by substantial evidence, acknowledging the informal nature of the happy hour, but finding that Google clearly derived a benefit from its employee’s participation in the event by the development and maintenance of business relationships that generated increased sales and revenue. The Court also found that the employee’s attendance at the happy hour “altered the usual geographical or temporal scheme of travel, thereby altering the risks to which [he was] usually exposed.”

Employers should be aware that any events (including happy hours) that benefit them, where employees are encouraged to attend, may lead to not only workers’ compensation claims by injured employees, but also may lead to claims by third parties that have been injured by employees attending such events.

For labor and employment guidance, call us at 631-738-9100.

1. Matter v. Google Inc., No. CV-23-0719, 2024 N.Y. App. Div. LEXIS 4814 (3d Dept. 2024). ↩︎
2. The injuries were reported to be “traumatic brain injury, was diagnosed with vertigo, and injured in his left shoulder, left knee, right elbow, left lung, four ribs, and both eyes.” ↩︎
3. Matter, 2024 N.Y. App. Div. LEXIS 4814, at *1. ↩︎

In the process of selling your business, it is important to consider your existing employees and how and when you will inform them of the sale. Employees contribute to the company’s culture, its values, and its processes; and their expertise can prove instrumental in ensuring the business continues operating efficiently. Here are some tips for disclosing the news while retaining key employees, bridging the gap between old and new ownership, and facilitating a smooth transition.

• Consider the Size of Your Company
  The size of your company can affect whether you employ a strategy to disclose prior to or after the sale. Despite the risks and benefits of either strategy, transparency is optimal to prevent employees learning about the sale from third parties.
  
  If your staff is large, then waiting until after the sale may achieve the best result. In this case, disclose early information about the sale only to those employees that will play a significant role in the sale process, such as the controller or CFO. These employees should sign a non-disclosure agreement to ensure information is kept confidential.
  
  If your staff is small, then letting employees know prior to the sale may prove beneficial. Early disclosure to staff provides early awareness and an opportunity for mental preparation. This fosters a sense of transparency and trust, allowing employees to engage in the process and offer valuable input. Moreover, this provides the new buyer with ample time to meet with your key employees to ensure they remain onboard post-sale.
  
  
• Consider a Two-Tiered Approach
  In a two-tiered approach, you first tell your key employees about the sale, either individually or collectively, then disclose to lower-level employees. This additional preparation time provided to key employees allows them to formulate favorable responses to questions and concerns about the news of the sale from lower-level employees.
  
  
• Consider the Benefits of Post-Sale Disclosure
  If the sale prematurely dissolves, the decision to disclose post-sale avoids anxiety about job insecurity, which can result in unnecessary employee flight. Additionally, the ability of the business to manage its day-to-day operations remains intact, and damage to relationships with clients, customers, or employees is prevented. It also avoids the perception that your business is failing amongst customers, clients, and suppliers, which protects your ability to obtain extensions of credit. In addition, if competitors do learn of the sale, they may attempt to poach your employees and/or customers.
  
  
• Have a Team Meeting
  Team meetings allow the time for employees to understand the sale and ask any questions. Often, employees are apprehensive of job instability as a result of the sale, so it may be beneficial to invite the new owner(s) to the meeting to discuss their plans upon completion of the sale. It may be beneficial to structure the discussion by emphasizing the positive features the sale has for your employees. For example, a new buyer may invest heavily in the company, increase salaries, and make other improvements to the business. If you position the transition correctly, employees will view this as an opportunity rather than a threat. Moreover, it is optimal to take the time to assure employees that their jobs are secure. Your employees will be comforted by this information, and that aids the transition.
  
  
• Approach the Announcement with Compassion
  It is likely optimal to approach the announcement with the utmost compassion, recognizing the diverse emotional responses that each employee may have to the news. This will demonstrate an understanding of the feelings associated with this significant change. Encourage employees to continue their professional development and growth, emphasizing the ongoing opportunities for their careers at the company. Instill confidence in your employees by assuring them that the new owner will take care of their well-being, fostering stability within the company and enabling the pursuit of growth strategies.
  
  
• Consider Stay or Retention Bonuses
  Retention bonuses are paid to long-term and loyal employees that stayed with the business for the entire time that it took to grow and make it prosper, while stay bonuses are paid to employees who stay with the company until the closing date or some period in the future when the transition work is expected to be complete.
  
  Stay bonuses serve as powerful tools to incentivize key personnel to remain committed and engaged throughout the transition process and beyond. They help in retaining crucial talent during the sale and ensure the continuity of essential skills and knowledge for the buyer. They also provide motivation to actively contribute to a successful transition, and act as a strategic investment to preserve stability.
  
  Keep any bonuses realistic. If bonuses are too high, it can cause financial strain, unrealistic expectations, and potential morale issues. Disproportionate bonuses may lead to resentment among employees, create perceptions of unfairness, and pose challenges to long-term sustainability. A realistic bonus avoids disincentivizing employees that remain at the business.
  
  Typically, bonuses are negotiated between the buyer and the seller during a business sale. Most of the time, the seller fulfills existing or created bonus obligations agreed upon. Buyers may agree to take on some bonus obligations, recognizing the value of retaining key employees and aligning with strategic goals. Details of bonus payments should be specified in the sale agreement.

For guidance on managing employees during the process of selling your business, call us at 631-738-9100.

This past spring, the Federal Trade Commission (FTC) proposed a rule that would have banned non-compete agreements nationwide. However, this week, a federal court in Texas ruled that the FTC lacked statutory authority to implement the rule,[1] which was set to go into effect on Sept. 4, 2024.

Judge Ada Brown ruled not only that the FTC did not have the authority to impose such a ban, but also that the rule was arbitrary and capricious, in that there was insufficient evidence produced to support a complete ban on non-competes, rather than a targeting of solely those non-competes which could be considered “harmful.”

Non-competes are meant to prevent employees from leaving one company to join a competitor or start their own competing business. They are also a way for employers to protect their company’s important and private information. While the FTC asserted that non-competes are an “exploitive practice” that violate workers’ “fundamental freedom” to change jobs or start their own business, business owners argued that non-competes protect their confidential information that is essential to their continued operation.

The Texas court’s ruling applies nationwide, and the FTC is reportedly considering an appeal.

If you use non-compete agreements and you have questions on how this affects your
business, please contact Christine Malafi at 631-738-9100.

https://www.ftc.gov/news-events/news/press-releases/2024/04/ftc-announces-rule-banning-noncompetes

https://www.wsj.com/us-news/law/judge-tosses-ftc-ban-on-noncompete-agreements-ae517b48

https://www.cnn.com/2024/08/20/business/us-judge-strikes-down-noncompete-agreements/index.html

[1] Ryan LLC, et. al. v. Federal Trade Commission, (USDC Northern District 8/20/2024).