What NY Small Businesses must know about the Corporate Transparency Act and Beneficial Ownership Reporting

You may have heard that there is a new law called the Corporate Transparency Act, which is a law that aims to prevent money laundering and the hiding of assets by oligarchs and other bad actors by requiring all beneficial owners of certain entities to report their identity and whereabouts. On September 29, 2022, the Financial Crimes Enforcement Network (FinCen) issued regulations implementing that law, called the Beneficial Ownership Information Reporting Requirements. This affects even your small business if you have an entity that was created by filing documents with New York’s Secretary of State. In other words, it does apply if you formed a New York LLC or New York corporation.

ALL OF THIS HAS BECOME SERIOUS BUSINESS ON JANUARY 1, 2024.

Here is what you should know as a New York limited liability company or corporation concerning the new Corporate Transparency Act and its implementing regulations.

What is the Corporate Transparency Act and how does it affect my New York LLC or corporation?

The Corporate Transparency Act aka the law “establishing beneficial ownership information reporting requirements” was enacted as part of the Anti-Money Laundering Act of 2020. It allows the US government to collect information about the beneficial ownership of entities to prevent money laundering, fraud, tax evasion, and so forth. The act and the implementing regulations even apply to small mom-and-pop LLCs and corporations, as long as the formation of the entity required a filing with the New York Secretary of State. As an owner of such entities, you will have to comply with this new law and its regulations.

What companies have to report beneficial ownership information?

Any entity that is considered a “reporting company” under the law and which does not qualify for an exemption.  A reporting company is  either (i) a domestic reporting company such as a New York LLCs and New York corporations, limited liability companies, and any other entities created by the filing of a document with a secretary of state or any similar office in the United States or (ii) foreign entities, including corporations and limited liability companies formed under the law of a foreign country that have registered to do business in the United States by the filing of a document with a secretary of state or any similar office.

Any such entity is a reporting company unless it qualifies for an exemption.  The law has 23 exemptions and you can check them here: Are some companies exempt from the reporting requirement?

Tip:  Assume that your small New York LLC or corporation is a Reporting Company.  The exemption usually do not apply to your regular small business.

What does the Reporting Company have to report?

The Reporting Company has to report all its beneficial owners and, in some circumstances,  company applicants. 

A beneficial owner is anyone who owns or controls at least 25% of the Reporting Company or exercises substantial control over the company. Substantial control could be anyone who is authorized to make important decisions for the company.   While it sounds easy to determine who owns 25% or more of any entity, it can be tricky to determine who has substantial control without owning actual equity in the company.  As an example, a CEO of a corporation does have substantial control. A managing member in a limited liability company has substantial control.

A company applicant is anyone who filed the document that created the company, so it could be your attorney or even the person who does it for some online formation service, as well as the person who orders the filing of the company from a service, accountant or attorney.

The reporting company ONLY has to report the company applicant if the company was formed on or after January 1, 2024.  All prior companies do not have to worry about reporting company applicants.

For each beneficial owner or company applicant, the company has to report:

  • the Individual’s full name
  • Date of birth
  • Residential address for each beneficial owner and business address for each professional company applicant
  • the Type of unexpired ID presented (Driver’s license, US passport, Foreign passport)
  • ID number
  • ID issuing jurisdiction
  • and Image of the ID

When do we have to get this done?

If your reporting company was formed prior to January 1, 2024, you have one year (January 1, 2025) to file the initial reports.

If you form an LLC or corporation after January 1, 2024, you will have 90 days after formation. If you form an LLC or corporation after January 1, 2025, you will have 30 days after formation.

How do I report this and where?

You can make the report online using the BOI E-Filing system.

Do I need to hire an accountant or attorney to make the filing?

Under normal circumstances, reporting companies should be able to manage this on their own, using the existing BOI E-Filing system.   In addition, FinCen has many more resources of information, such as the Small Entity Compliance Guide, an FAQ page and even the ability to chat with FinCen staff.

However, any time you have issues determining whether your entity is exempt from the reporting requirements or whether a particular person is a beneficial owner or not, you should consider asking an attorney, such as myself.