{"id":5677,"date":"2024-04-22T12:56:07","date_gmt":"2024-04-22T12:56:07","guid":{"rendered":"https:\/\/www.sherin.com\/real-estate\/?p=5677"},"modified":"2024-04-23T17:37:33","modified_gmt":"2024-04-23T17:37:33","slug":"to-disclose-or-not-to-disclose-that-is-the-question-an-introduction-to-the-ny-llc-transparency-act","status":"publish","type":"post","link":"https:\/\/www.sherin.com\/real-estate\/2024\/04\/22\/to-disclose-or-not-to-disclose-that-is-the-question-an-introduction-to-the-ny-llc-transparency-act\/","title":{"rendered":"To Disclose, or Not to Disclose, That Is the Question: An Introduction to the NY LLC Transparency Act"},"content":{"rendered":"

Business entities coming to understand the requirements of the Federal Corporate Transparency Act<\/a> (\u201cFederal CTA\u201d) and its reporting obligations should be aware that New York State has enacted a LLC Transparency Act (\u201cNY Act\u201d)<\/a>. \u00a0This is of particular importance to real estate companies which make frequent use of LLCs to hold real estate.\u00a0 The NY Act will require all limited liability companies formed or registered to do business in New York State (\u201cNY LLCs\u201d) to make a filing with the New York Department of State (\u201cDOS\u201d).<\/p>\n

BACKGROUND:<\/strong><\/h3>\n

The NY Act was prompted in part by an effort to promote transparency and hinder money laundering in Manhattan\u2019s high-end residential real estate market. \u00a0Governor Hochul initially signed the NY Act on December 22, 2023, subject to a \u2018chapter amendment\u2019 subsequently signed on March 1, 2024. \u00a0The December iteration of the NY Act provided generally that entities\u2019 beneficial owner information would be publicly accessible, with some minor exceptions. \u00a0The principal reason for the March \u2018chapter amendment\u2019 was to amend this requirement, with the effect that reported beneficial owner information would be confidential and housed on a secure database, available only for certain stated reasons, including at the beneficial owner\u2019s request or for law enforcement purposes.<\/p>\n

tIMING:<\/strong><\/h3>\n

The NY Act will become effective on January 1, 2026. \u00a0All NY LLCs formed or registered to do business prior to January 1, 2026 will have one year to complete their DOS filings. \u00a0NY LLCs formed on or after January 1, 2026 will have thirty (30) days from the date of formation or registration to complete their required DOS filings.<\/p>\n

REQUIRED DISCLOSURE:<\/strong><\/h3>\n

Every NY LLC will be required to file with DOS in some form, and to recertify such filings annually. \u00a0The specific information contained in the DOS filing will depend on each NY LLC\u2019s status as an exempt company,<\/em><\/strong> or a non-exempt company<\/em><\/strong>. \u00a0The NY Act incorporates the list of twenty-three exempt entity types set forth in the Federal CTA<\/a>, such that any NY LLC exempt under the Federal CTA is considered an exempt company<\/em><\/strong> under the NY Act.<\/p>\n

i. Exempt Companies<\/strong><\/p>\n

Each exempt company<\/em><\/strong> must file an attestation, under penalty of perjury, stating the specific exemption claimed and \u201cthe facts on which such exemption is based.\u201d \u00a0This requirement differs from that of the Federal CTA, which does not require any filings from exempt companies<\/em><\/strong>.<\/p>\n

ii. Non-Exempt Companies<\/strong><\/p>\n

NY LLCs that do not fall within one of the twenty-three exempt entity types must disclose the following information for each of their beneficial owners and applicants (as defined in the Federal CTA):<\/p>\n

    \n
  1. Full legal name,<\/li>\n
  2. Date of birth,<\/li>\n
  3. Current home or business street address, and<\/li>\n
  4. Unique identifying number from one of the following: (a) an unexpired passport, (b) an unexpired state driver\u2019s license, or (c) an unexpired identification card or document issued by a state or local government agency or tribal authority for the purpose of identification of that individual.<\/li>\n<\/ol>\n

    SUMMARY AND CONSIDERATIONS:<\/strong><\/h3>\n

    Entities formed or registered to do business in the United States will greatly benefit from proactive planning in order to determine whether they qualify as an exempt company<\/em><\/strong>, and if so, which exemption(s) they fall within. \u00a0NY LLC exempt companies<\/em><\/strong> will be required to substantiate their exemption by providing supporting facts, recertified annually. \u00a0Business entities should monitor their exempt status to ensure that they continue to meet the requirements of the stated exemption(s) or otherwise be prepared to submit a filing disclosing their beneficial owner information at the Federal and New York state level.<\/p>\n

    Other states are considering imposing similar beneficial owner disclosure requirements.\u00a0 Although the NY Act narrowly avoided making the beneficial owner database public, other states may enact legislation that varies drastically from the Federal CTA and the NY Act, and filed beneficial owner information may not have the same protections.<\/p>\n

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    For more information on the Corporate Transparency Act, check out our latest blog posts:\u00a0<\/em><\/p>\n