UPDATE: On December 23, 2023, Governor Hochul signed Legislation S.995B/A.3484, which creates an LLC beneficial ownership database that can be accessed by Federal, State and local government law enforcement across New York State. Individuals who set up, or already have ownership of LLCs and meet the requirements for disclosure, will be required to identify the names of the beneficial owner(s) in the filing.
Owners of New York limited liability companies, or LLCs, have long enjoyed anonymity when it comes to the ownership of their company. Currently, LLC owners are under no obligation to disclose their personal identity to the public. However, last month, the New York State Senate and Assembly passed the LLC Transparency Act, a bill that would require LLC owners to disclose their full legal name to New York State, which would then be made available through a public database. As it stands, the bill is headed towards Governor Kathy Hochul’s desk.
As an owner of an LLC, there are a few questions to keep in mind:
What would the law require?
Under the proposed law, New York State would require LLC owners to disclose three pieces of information: (1) the LLC owner’s full legal name, (2) the name of the LLC, and (3) the address of the LLC. If an LLC owner fails to make such ownership disclosures, they may face penalties.
How would this law be enforced?
If an LLC owner fails to file the ownership disclosure for a period exceeding 30 days, the LLC will be shown to be “past due” on the records of the New York State Department of State. The LLC would have its past due status removed upon filing the ownership disclosure. This may hinder the LLC’s ability to participate in transactions such as obtaining a loan or selling assets.
If an LLC owner fails to file the ownership disclosure for a period exceeding two years, the Department of State will mail a notice of delinquency to the last known business address of the LLC. If the LLC fails to file the ownership disclosure within 60 days of receiving the notice of delinquency, the LLC will be shown to be delinquent on the records of the Department of State. An LLC may remove the delinquency status only upon filing an ownership disclosure and paying a civil penalty of $250.
Are there any exceptions to the proposed law?
The only possible exception is through a waiver. Waivers exist to protect companies with significant privacy interests. The bill provides that significant privacy interests include, but are not limited to, an LLC owner that is a whistleblower, using an LLC for the very specific purpose of filing false claims act lawsuits, or an owner participating in an address confidentiality program. Address confidentiality programs are available to victims of kidnapping, as well as reproductive healthcare service providers, employees, volunteers, patients, or immediate family members of reproductive healthcare service providers. If neither of those circumstances apply, LLC owners would need to demonstrate that their company similarly has a significant privacy interest and should therefore not be required to make such disclosures.
When would this bill go into effect?
If signed by Governor Hochul, the bill would be effective 365 days after becoming law.
While the LLC Transparency Act has not yet become law, LLC owners should begin planning for the possibility of such disclosure requirements. Mainly, LLC owners should consider whether their company has a significant privacy interest. Please contact our corporate attorneys with any questions.
Thank you to Michael Nadeau for his research and writing assistance.