S3199: New York’s LLC Transparency Act

New York has enacted the LLC Transparency Act to increase clarity regarding the ownership of limited liability companies. The legislation, signed into law in a revised version in March 2024, introduces new reporting obligations. The primary objective is to curb the use of anonymous shell companies for illicit financial activities by requiring the disclosure of individuals who ultimately own or control these entities. This state-level initiative aligns with the principles of the federal Corporate Transparency Act (CTA) and mandates the submission of ownership information to the New York Department of State.

Entities Subject to Disclosure Requirements

The New York LLC Transparency Act applies to most limited liability companies operating within the state. This includes both domestic LLCs, which are formed under New York law, and foreign LLCs that are registered to conduct business in New York. The requirements extend to entities regardless of their formation date; both newly created and pre-existing LLCs must comply with the disclosure mandates starting January 1, 2026. The law is specific to LLCs and does not apply to other entity types like corporations or limited partnerships.

The act incorporates the 23 exemptions established by the federal Corporate Transparency Act. These exemptions release certain types of entities from the beneficial ownership reporting requirement. Exempt entities commonly include large operating companies, which are defined by specific criteria related to employee count, operating presence, and gross receipts, as well as banks, credit unions, and publicly traded companies. Subsidiaries of certain exempt entities are also not required to file beneficial ownership information.

Unlike its federal counterpart, the New York law requires even exempt LLCs to make a filing. Instead of providing detailed beneficial owner information, these companies must submit an annual attestation to the Department of State. This filing must identify the specific exemption the LLC claims and provide the facts that support its exempt status.

Information Required for Disclosure

To comply with the law, reporting companies must gather and submit specific details for two categories of individuals: beneficial owners and company applicants. A “beneficial owner” is defined as any individual who, directly or indirectly, exercises substantial control over the LLC or owns or controls at least 25% of its ownership interests. The concept of “substantial control” is broad and can refer to senior officers, individuals with authority to appoint or remove officers, or those who direct or influence important decisions of the company.

The act also mandates the disclosure of information for a “company applicant.” This is the individual who directly files the document that creates the LLC or, for foreign LLCs, registers it to do business in New York. For LLCs formed before the law’s effective date of January 1, 2026, reporting applicant information may present challenges, but the requirement currently stands. For each beneficial owner and company applicant, the following information must be provided:

• Full legal name
• Date of birth
• A current business street address
• A unique identifying number from an unexpired government-issued identification document, such as a U.S. passport or a state-issued driver’s license

The Disclosure Filing Procedure

The process for submitting the required beneficial ownership information is managed by the New York Department of State. Reporting companies will file their initial disclosure documents electronically through a system designated by the department. For LLCs formed or registered on or before January 1, 2026, the deadline to file the initial report is January 1, 2027. LLCs formed after that date must file within 30 days of their formation or registration.

After the initial submission, LLCs are required to file an annual statement. This yearly filing serves to either confirm that the previously submitted beneficial ownership information is still accurate or to provide updated details if any changes have occurred. The annual statement also requires confirmation of the principal executive office’s street address and status as a reporting or exempt company.

If any information provided is found to be inaccurate, the LLC has a 90-day safe harbor period to correct the filing without penalty. This protection applies provided the initial submission was not willfully fraudulent.

The Public Disclosure Database

A central component of the LLC Transparency Act is the creation of a secure, confidential database to house the collected beneficial ownership information. Contrary to the law’s original version, which proposed a fully public database, the enacted legislation restricts access to sensitive personal data. Information such as a beneficial owner’s date of birth and unique identification number will not be available to the general public.

Access to the detailed beneficial ownership information is limited to specific circumstances. The data can be disclosed with the written consent of the beneficial owner, in response to a court order, or for valid law enforcement purposes. Government agencies may also request the information to carry out their official duties.

While the detailed personal data is confidential, the name of each beneficial owner will be made public. This information will be accessible through a searchable public database maintained by the Department of State. This allows the public to identify the individuals behind an LLC without exposing their sensitive personal information.

Consequences of Non-Compliance

Failure to comply with the disclosure requirements of the New York LLC Transparency Act carries significant consequences. An LLC that does not file its required beneficial ownership disclosure or exemption attestation for more than 30 days will be designated as “past due.” If non-compliance continues for two years, the LLC will be marked as “delinquent,” a public-facing status that can negatively impact business operations.

A direct implication of being marked delinquent is the inability to obtain a certificate of good standing from the state. This certificate is often required for various business activities, such as securing financing from a bank, entering into major contracts, or selling the business.

To resolve a delinquent status, the LLC must submit the overdue filing and pay a civil penalty of $250. In persistent cases of non-compliance or for knowingly providing false information, the Attorney General can seek to dissolve the LLC or annul its authority to do business in the state. Reinstatement requires settling all outstanding penalties and receiving confirmation from the Attorney General.