As covered in our Transparency-is-in-Your-Future series, on December 22, 2023, New York Governor Kathy Hochul signed into law the LLC Transparency Act (the “NY LLCTA”), requiring the disclosure of beneficial ownership information to the New York Department of State (“NY DOS”) by limited liability companies formed under the laws of the state of New York and foreign limited liability companies authorized to do business in the state of New York. The NY LLCTA takes effect on January 1, 2026, and is largely based on the federal Corporate Transparency Act (“CTA”). However, earlier this year, the U.S. Treasury Department announced the suspension of CTA enforcement against U.S. citizens and domestic reporting companies, while the Treasury’s Financial Crimes Enforcement Network (“FinCEN”) develops new regulations. Although the notice and comment period for FinCEN’s proposed interim final rule ended in May 2025, FinCEN has still not issued the final rule as of September 25, 2025.

The proposed changes to the CTA have caused conflicts in the NY LLCTA, which lead the New York State Congress to propose a bill amending the NY LLCTA (the “Proposed Amendment”). The Proposed Amendment has passed both the New York State Senate and the New York State Assembly and is currently waiting to be called for delivery to Governor Hochul for execution. Below is a brief summary of the amendments to the NY LLCTA if the Proposed Amendment were to be signed into law.

What entities will have to file if the Proposed Amendment becomes law?

Any domestic limited liability company that is formed under the laws of the state of New York and any foreign limited liability company that has filed an application for authority with the NY DOS will have to file a beneficial ownership disclosure with the NY DOS, unless it meets an exemption as discussed below. Furthermore, exemption under the NY LLCTA is not automatic – in order to become exempt, a member or manager of the limited liability company will have to sign a statement of exemption and file such statement with the NY DOS. The NY LLCTA does not affect corporations or limited partnerships, which are also formed by filings with the NY DOS, and already have different applicable reporting requirements.

Under the current NY LLCTA, a “reporting company” is defined as a limited liability company covered under the CTA (31 U.S.C.  § 5336(a)(11)), as amended, and any regulations promulgated thereunder, provided that such limited liability company is formed or authorized to do business in New York state.

The Proposed Amendment would amend the definition of “reporting company” to “mean a limited liability company that is: (i) created by the filing of a document with the secretary of state; or (ii) authorized to do business in this state”. Furthermore, the definition of “reporting company” does not mean or include:

(i) a securities issuer under the Federal Securities Exchange Act of 1934 (the “SEC Act”);

(ii) an entity that exercises governmental authority on behalf of a municipality, agency, authority, political subdivision of the state;

(iii) banking organizations, including banks, credit unions, bank holding companies, savings and loan holding companies, registered money transmitting businesses, or licensees as defined by the banking law, and registered brokers or dealers in securities;

(iv) an exchange or clearing agency under the SEC Act;

(v) any other registered securities exchange entity not described in subparagraphs (i), (vii), or (viii) that is under the SEC Act;

(vi) a registered investment company under the Federal Investment Company Act of 1940 (the “ICA”) or a registered investment adviser under the Federal Investment Advisers Act of 1940 (the “IAA”);

(vii) an investment adviser: (A) under section 203(l) of the IAA and that has completed certain filings with the SEC; or (B) as defined in article 23-A of the general business law.

(viii) an insurance company, as defined in the ICA;

(ix) an insurer that is authorized by the state and subject to supervision by the commissioner of financial services, and has an operating presence within New York state;

(x) a registered entity under the Federal Commodity Exchange Act;

(xi) a public accounting firm registered under the Federal Sarbanes-Oxley Act of 2002;

(xii) a public utility corporation that provides telecommunications services, electrical power, natural gas, or water and sewer services within the state;

(xiii) a financial market utility designated under the Federal Payment, Clearing, And Settlement Supervision Act of 2010;

(xiv) any pooled investment vehicle that is operated or advised by certain banking organizations in subparagraph (iii), or subparagraphs (v) or (vi);

(xv) certain tax-exempt entities under the Federal Internal Revenue Code of 1986;

(xvi) any limited liability company that: (A) operates exclusively to provide financial assistance to, or hold governance rights over, any entity described in subparagraph (xiv); (B) is a U.S. resident; (C) is beneficially owned or controlled exclusively by one or more U.S. residents that are U.S. citizens or lawfully admitted for permanent residence; and (D) derives at least a majority of its funding or revenue from one or more U.S. residents that are U.S. citizens or lawfully admitted for permanent residence;

(xvii) any entity that: (A) employs more than 20 employees on a full-time basis in the U.S.; (B) filed in the previous year Federal income tax returns in the U.S. demonstrating more than $5,000,000 in gross receipts or sales in the aggregate; and (C) has an operating presence at a physical office within the state;

(xviii) any limited liability company of which the ownership interests are owned or controlled, directly or indirectly, by one or more entities described in subparagraphs (i), (ii), (iii), (iv), (v), (vii), (viii), (ix), (x), (xi), (xii), (xiii), (xv) or (xvii);

(xix) any limited liability company: (A) in existence for over one year; (B) that is not engaged in active business; (C) that is not owned, directly or indirectly, by a foreign person; (D) that has not, in the preceding 12-month period, experienced a change in ownership or sent or received funds in an amount greater than$1,000, including through a financial account or accounts in which the entity, or an affiliate of the entity, maintains an interest; and (E) that does not otherwise hold any kind or type of assets, including an ownership interest in any limited liability company; and

(xx) any entity or class of entities that the NY DOS, by regulation, determined should be exempt because requiring beneficial ownership information from the entity or class of entities: (A) would not serve the public interest; and (B) would not be highly useful in national security, intelligence, and law enforcement agency efforts to detect, prevent, or prosecute money laundering, the financing of terrorism, proliferation finance, serious tax fraud, or other crimes.

The current NY LLCTA defines “exempt company” to have the same meaning as under the CTA ((31 U.S.C. § 5336(A)(11)(B), which exempts most financial services institutions, including investment and accounting firms, securities trading firms, banks, and credit unions that report to and are regulated by government agencies such as the SEC, or the FDIC, as well as tax exempt organizations, large operating companies, and certain inactive entities.

The Proposed Amendment would amend the definition of “exempt company” to “mean a limited liability company or foreign limited liability company not otherwise defined as a reporting company.” The definition should have stopped there, however, the New York State legislature added that an exempt company must:

“meet[] one or more of the following conditions:

(1) a minor child, which shall mean an individual under the age of eighteen;

(2) an individual acting as a nominee, intermediary, custodian, or agent on behalf of another individual;

(3) an individual acting solely as an employee of a limited liability company, and whose control over or economic benefits from such entity is derived solely from the employment status of the person;

(4) an individual whose only interest in a limited liability company, is through a right of inheritance; or

(5) a creditor of a limited liability company unless the creditor meets the requirements of paragraph one of this subdivision.”

These above stated conditions should be listed as exemptions under the definition of “beneficial owner” rather than “exempt company”. As the Proposed Amendment is currently written a limited liability company could not qualify as a reporting company, because it meets one of the 20 criteria listed above, but also not qualify as an exempt company, because it does not meet one of the five conditions immediately preceding this paragraph. In which case, what is it?

Who constitutes a “beneficial owner” if the Proposed Amendment becomes law?

The current NY LLCTA defines “beneficial owner” to “have the same meaning as under the CTA ((31 U.S.C.  § 5336(A)(3)), as amended, and any regulations promulgated thereunder.”

The Proposed Amendment would amend the definition of “beneficial owner” to “mean, with respect to any entity or individual who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise: (1) exercises substantial control over the entity; or (2) owns or controls not less than twenty-five percent of the ownership interests of the entity.”

Since the conditions listed under “exempt company” in the Proposed Amendment are not specifically carved out from the definition of “beneficial owner” in the Proposed Amendment, minors, employees of the limited liability company, or creditors of the limited liability company could qualify as beneficial owners. We hope the forthcoming regulations will clarify what “indirect” ownership means.

What other amendments are included in the Proposed Amendment?

The Proposed Amendment adds that “[t]he department of state is hereby authorized to promulgate rules and regulations to further clarify any definitions outlined in this section”. Hopefully, the NYS DOS will issue clarification on the issues raised above.

Below is a brief summary of the NY LLCTA provisions that go into effect on January 1, 2026.

What constitutes “beneficial ownership disclosure” under the NY LLCTA?

The NY LLCTA requires each reporting company file an initial report or beneficial ownership disclosure to identify each beneficial owner by (1) full legal name; (2) date of birth; (3) current home or business street address, and (4) a unique identifying number from: (i) an unexpired passport; (ii) an unexpired state driver’s license; or (iii) 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.

When must the information be filed with NY DOS under the NY LLCTA?

Domestic limited liability companies in existence before January 1, 2026 and foreign limited liability companies authorized to do business in New York before such date will have to electronically file their beneficial ownership disclosure information or a signed statement of exemption by December 31, 2026.

Domestic limited liability companies formed on or after January 1, 2026 and foreign limited liability companies first qualifying for authority to do business in New York on or after such date will be required to electronically file their beneficial ownership disclosure information or a signed statement of exemption within 30 days of such filing.

Are limited liability companies required to update their beneficial ownership information or exempt status?

Yes, annually. Each reporting company must electronically file an annual statement with the NY DOS confirming or updating its (1) beneficial ownership disclosure information, (2) principal executive office street address, (3) status as an exempt company, if applicable, and (4) such other information as may be designated by the NY DOS. Although the NY LLCTA does not specify, presumably, the NY DOS regulations will clarify that each exempt company will also need to file an annual statement confirming its exempt status or otherwise filing its beneficial owner disclosure after losing its exempt status.

What are the penalties for failing to comply with the NY LLCTA?

The NY LLCTA establishes civil penalties for noncompliance. A reporting company which has failed to file the beneficial ownership disclosure, exemption attestation or annual statement as required for more than 30 days shall be shown as “past due” on the NY DOS records until an updated report is filed. The NY state attorney general may assess a fine of up to $500 per day that such company has been past due. Such “past due” status will be removed from the records of the NY DOS upon (1) the past-due company filing an up-to-date statement as required, (2) paying a $250 fine and (3) the attorney general verifying that any other penalties imposed have been paid.

If the failure to file the beneficial ownership disclosure, exemption attestation or annual statement as required continues for more than two years, the company shall be shown as “delinquent” on the records of NY DOS.  The NY state attorney general may assess a fine of up to $500 per day that such company has been delinquent. Such delinquency status will be removed from the records of the NY DOS upon (1) the delinquent reporting company filing an up-to-date statement as required, (2) paying a $250 fine and (3) the attorney general verifying that any other penalties imposed have been paid.

Additionally, any reporting or exempt company that fails to file its beneficial ownership disclosure or attestation of exemption shall be deemed “suspended”, if such company does not complete such filing within 30 days after receiving a notice from NY DOS of its failure to timely file. Under the NY LLCTA, a limited liability company that’s status is changed to “suspended” by the NY DOS cannot conduct business in New York state until the required information has been filed, at which point the suspension shall be deemed annulled and all corporate powers, rights, privileges, immunities, duties and liabilities shall be restored retroactively. However, the suspension of a limited liability company shall not limit or impair the validity of any contract or act of such company, any right or remedy of any other party under or by virtue of any contract, act or omission of such company, the right of any other party to maintain any action or special proceeding against such company, the right of such company to defend any action or special proceeding, or result in any member, manager or agent of such company becoming liable for the contractual obligations or other liabilities of the limited liability company.

Furthermore, the NY state attorney general may bring an action to dissolve or cancel any limited liability company that is delinquent in completing the required filings or knowingly filed false or fraudulent beneficial ownership information.

What should LLCs do to comply with the NY LLCTA?

As of September 25, 2025, the NY DOS has not created an electronic filing database for the required filings under the NY LLCTA or published any accompanying regulations.

Companies should keep up to date on any developments regarding the Proposed Amendment to the NY LLCTA and check to see if NY DOS has issued regulations for compliance with the NY LLCTA, including the creation of the required electronic filing database. Once the rules have been issued, entities should review the regulations to confirm whether they must file an initial report or are eligible to file for an exemption. Additionally, companies should keep updated records of the required information for each owner and enhance their compliance processes to ensure that the required information is being collected and reported to NY DOS on an annual basis.

Companies should also include language in their operating agreement or similar document that requires owners of the company to regularly provide any information required to comply with the NY LLCTA. Additionally, companies may want to consider indemnification provisions if an owner fails to timely provide the required information or provides false or incomplete information. If such operating agreement contains a confidentiality provision, it should include an exception to permit the company to report the required information to NY DOS.

Hopefully, prior to January 1, 2026, the legislature will amend the NY LLCTA to provide clarifications with respect to the issues identified above or the NY DOS will promulgate rules to provide such clarification.

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For further information or guidance on revising your policies, procedures, and operating agreements, please contact David Paseltiner or Rose Egan. You can follow our blog for more information as it becomes available.