While these two laws have many similarities, there are some notable differences.
On December 23, 2023, New York Governor Kathy Hochul signed into law new legislation that will require all limited liability companies (LLCs) that are either formed under New York law or that are or seek to be authorized to do business in the state to submit information to the New York Department of State disclosing the entity’s beneficial owners, unless the entity qualifies for an exemption from such requirements.
The LLC Transparency Act (NYTA) will become effective on an undetermined date in 2024 upon passage of a “chapter amendment” by the New York Legislature. The NYTA is modeled after the federal Corporate Transparency Act (CTA), which was enacted in 2021 and became effective on January 1, 2024. Unlike the CTA, however, the NYTA applies only to LLCs, and not to other types of entities.
The information that a nonexempt LLC must provide to the New York Department of State is essentially the same as the information such an entity will be required to report to the U.S. Department of the Treasury's Financial Crimes Enforcement Network (FinCEN) under the CTA. In fact, definitions of important terms such as “beneficial owner” and “reporting company” used in the NYTA refer to the applicable definitions in the CTA. The NYTA also uses the same 23 exemptions from the reporting requirements as the CTA. Beneficial ownership information filed with the New York Department of State under the NYTA will, similar to information filed with FinCEN under the CTA, be kept confidential and will be made available only to specified governmental authorities. (A previous version of the NYTA would have required public disclosure of beneficial ownership information, but this was stricken from the law just prior to its signing by the governor.)
While these two laws have many similarities, there are some notable differences. First, as noted above, the NYTA applies only to LLCs. The CTA, in contrast, applies not only to LLCs but also to other types of entities, such as corporations, limited partnerships and statutory trusts.
Secondly, the CTA requires that beneficial ownership information for a newly formed entity be provided to FinCEN no later than 90 days after the date of its formation. (This deadline will be reduced from 90 to 30 days for entities formed on or after January 1, 2025.) In contrast, the NYTA, once effective, will require beneficial ownership information to be submitted concurrently with the filing of the articles of organization for an LLC being formed under New York law, or with the filing of the initial application for authority filed by a foreign LLC.
A third difference is that the CTA requires beneficial ownership reports for reporting companies formed on or after January 1, 2024, to include information not only on its beneficial owners, but also on up to two “company applicants” (i.e., the persons that directly caused the formation document for the new entity to be filed with the applicable secretary of state’s office, and the individual primarily responsible for overseeing the formation of such an entity). The NYTA does not require any such disclosure regarding company applicants.
As noted above, the NYTA adopts the same 23 exemptions from the reporting requirements as are contained in the CTA. However, if a New York LLC or a foreign LLC seeking authority to do business in New York falls within one or more exemptions, the NYTA requires the entity to submit a statement signed by a member or manager of the entity indicating the specific exemption(s) under which it qualifies. In contrast, an entity qualifying for one or more of the exemptions under the CTA is not required to submit any such statement to, or filing with, FinCEN.
New York LLCs formed prior to the NYTA’s effective date, and foreign LLCs that have obtained authority to do business in New York prior to the effective date, will have until January 1, 2025, to file the required beneficial ownership report or the statement specifying the applicable exemption.
We will continue to monitor the New York Legislature and the New York Department of State for amendments to the NYTA and any proposed rules issued thereunder.
About Duane Morris
Duane Morris is actively monitoring developments regarding the CTA and issuing Alerts on the topic. Duane Morris will provide advice to clients related to CTA compliance only when explicitly engaged to do so in writing.
For More Information
If you have any questions about this Alert, please contact Thomas R. Schmuhl, Jocelyn Margolin Borowsky, Joel N. Ephross, Bruce H. Jurist, Hope P. Krebs, Lee J. Potter Jr., any of the attorneys in our Corporate Transparency Act Group or the attorney in the firm with whom you are regularly in contact.
Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.