New York Jumps on the BOI Reporting Bandwagon
The Beneficial Ownership Information Reporting Requirements final rule (“BOI Reporting Rule”) adopted on September 30, 2022 by the Financial Crimes Enforcement Network (“FinCEN”) of the U.S. Department of the Treasury finally took effect on January 1, 2024.[1] The BOI Reporting Rule gives effect to the Corporate Transparency Act (“CTA”) passed by Congress early in 2021.[2] The BOI Reporting Rule now requires many millions of business entities (most small corporations, limited liability companies, and other similar entities) formed in the United States, which are referred to as “reporting companies,” to report to FinCEN certain identifying information about the beneficial owners who own or control such entities, as well as the company applicants who form or register the reporting companies. On December 22, 2023, Governor Kathy Hochul signed into law the “LLC Transparency Act,” pursuant to which New York State will piggyback on the federal beneficial ownership information (“BOI”) reporting requirement, at least with regard to limited liability companies formed or authorized to do business in New York.[3]
The LLC Transparency Act incorporates into the New York Limited Liability Company Law (“LLC Law”) certain key definitions from the CTA and the BOI Reporting Rule, including “reporting company,” “beneficial owner,” “initial report,” and “exempt company,” with the important difference that, in New York, a “reporting company” will only include domestic limited liability companies formed under New York law and foreign LLCs authorized to do business in New York.[4] Thus, closely held corporations and entities other than LLCs that are required to report to FinCEN under the CTA and BOI Reporting Rule will not be required to report separately in New York under the LLC Transparency Act. The effect of the LLC Transparency Act is, therefore, that any limited liability company formed or registered in New York that has to file BOI with FinCEN will also have to file BOI with New York’s Department of State.
New York’s BOI reporting requirement is implemented primarily through new Sections 215 and 810 added to the LLC Law.[5] When effective on December 21, 2024, Sections 215 and 810 will require that a reporting company, when filing its articles of organization (for a New York LLC) or an application for authority (for a foreign LLC), must also file with the Department of State a “beneficial ownership disclosure” identifying each “beneficial owner”[6] by “(1) full legal name; (2) date of birth; (3) current business street address; and (4) a unique identifying number from an acceptable identification document,” as defined in the CTA.[7] Acceptable identification documents under the CTA include a current U.S. or foreign passport or State driver’s license or other identification document issued by a State, local government, or Indian tribe.[8] Alternatively, if the reporting company has already submitted an “initial report” to FinCEN containing the required information, the company can comply with the LLC Transparency Act by submitting a copy of the initial report filed with FinCEN.[9] In addition to newly formed companies, existing LLCs formed on or before the December 21, 2024 effective date of the LLC Transparency Act will have to file the required information with the New York Department of State no later than January 1, 2025.[10] Even companies, new and old, that qualify for an exemption under the definition of “exempt company” incorporated from the CTA will have to file a statement indicating that they are excluded under one of the exemptions.[11]
Companies that fail to file the beneficial ownership disclosure for a period exceeding 30 days will be shown as “past due” on the Department of State’s records,[12] which may prevent the LLC from completing certain business transactions. If the company fails to file the beneficial ownership disclosure for a period exceeding two years, then it will be shown as “delinquent” on the Department of State’s records,[13] which may lead to dissolution of a domestic company by proclamation or annulment of a foreign company’s authority to do business.[14]
The LLC Transparency Act will also amend New York’s Executive Law by adding a new Section 100-b providing for the Secretary of State to maintain on its website a publicly available database on each domestic business entity and each foreign entity authorized to do business in New York.[15] The database will include, among other things, the name of the business entity, its current business street address, and the date of the entity’s most recent filing, as well as its filing history.[16] In addition, the database will include “the full legal name or names of each beneficial owner” of a limited liability company that is a reporting company under the CTA and the LLC Transparency Act.[17] The default is that each beneficial owner’s name will be publicly available, but owners will be able to apply for a waiver to withhold their name if they can “cite significant privacy interests,” such as “where a beneficial owner is a natural person participating in an address confidentiality program, or is a member of a limited liability company acting as a relator in a qui tam action filed” under the federal False Claims Act or New York finance law.[18] All information required to be disclosed under the LLC Transparency Act other than the beneficial owner’s name “shall be deemed confidential except for purposes of law enforcement, or as otherwise required to be disclosed pursuant to a court order.”[19] Confidential information associated with a beneficial owner that will be held electronically is required to be encrypted.[20] In addition, each beneficial owner is to be assigned an “anonymized unique identifying number” that is not based on other personally identifying numbers such as social security or tax identification numbers.[21] If a beneficial owner is granted a waiver from having their name disclosed on the publicly available database, then the Secretary of State must instead disclose the anonymized unique identifying number assigned to that owner.[22]
[1] For a general description of the BOI Reporting Rule, see eMinutes, FinCEN Reporting — Yes It Is Really Happening (Feb. 23, 2023). The BOI Reporting Rule is codified at 31 C.F.R. § 1010.380.
[2] The CTA is codified at 31 U.S.C. § 5336.
[3] See New York State, Governor Hochul Signs the LLC Transparency Act (Dec. 23, 2023). Governor Hochul signed into law New York State Senate Bill S995-B. The LLC Transparency Act takes effect on December 21, 2024, 365 days after it was signed into law. See N.Y. S. Bill S995-B § 10.
[4] N.Y. S. Bill S995-B § 2 (to be codified at N.Y. L.L.C. Law § 102(ii)-(ll)).
[5] Id. §§ 5, 8. Section 215 will apply to New York LLCs while Section 810 will apply to foreign LLCs authorized or seeking authority to do business in New York.
[6] For a discussion of who will qualify as a “beneficial owner” subject to the federal and state BOI reporting requirements, see eMinutes, Questions Continue About FinCEN Beneficial Ownership Information Reporting (Dec. 8, 2023), and eMinutes, FinCEN Reporting — Yes It Is Really Happening (Feb. 23, 2023).
[7] N.Y. S. Bill S995-B §§ 5, 8 (citing 31 U.S.C. § 5336(a)(1)) (to be codified at N.Y. L.L.C. Law §§ 215(a), 810(a)).
[8] See eMinutes, FinCEN Reporting — Yes It Is Really Happening.
[9] N.Y. S. Bill S995-B §§ 5, 8 (to be codified at N.Y. L.L.C. Law §§ 215(a), 810(a)).
[10] Id. (to be codified at N.Y. L.L.C. Law §§ 215(c)(1), 810(c)(1)).
[11] Id. §§ 3, 5, 8 (to be codified at N.Y. L.L.C. Law §§ 203(e)(7), 215(c)(1), 810(c)(1)).
[12] Id. §§ 5, 8 (to be codified at N.Y. L.L.C. Law §§ 215(c)(2), 810(c)(2)).
[13] Id. (to be codified at N.Y. L.L.C. Law §§ 215(c)(3), 810(c)(3)).
[14] See N.Y. Tax Law §§ 203-a, 203-b.
[15] N.Y. S. Bill S995-B § 9 (to be codified at N.Y. Exec. Law § 100-b(1)).
[16] Id. (to be codified at N.Y. Exec. Law § 100-b(1)).
[17] Id. (to be codified at N.Y. Exec. Law § 100-b(2)(a)).
[18] Id. (to be codified at N.Y. Exec. Law § 100-b(2)(b)).
[19] Id. §§ 5, 8 (to be codified at N.Y. L.L.C. Law §§ 215(b), 810(b)).
[20] Id. (to be codified at N.Y. L.L.C. Law §§ 215(b), 810(b)).
[21] Id. (to be codified at N.Y. L.L.C. Law §§ 215(b), 810(b)).
[22] Id. § 9 (to be codified at N.Y. Exec. Law § 100-b(2)(b)).