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. Now, on September 29, 2022, the Financial Crimes Enforcement Network finally 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.
Here is what you should know as a New York limited liability company or corporation with respect to the new Corporate Transparency Act and its implementing regulations.
What is the Corporate Transparency Act and how does it affect my NY LLC or corporation?
The Corporate Transparency Act 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 in order 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.
Who has to report?
Any entity that is considered a “reporting company.” New York LLCs and New York corporations are considered reporting companies. There are some exceptions but they usually do not apply to the usual small business LLC or corporation that I deal with on a regular basis (for example, large companies with more than 20 employees, 5 million revenue and a physical US office are exempted).
What needs to be reported?
If you are a beneficial owner or a company applicant you have to report your name, birthdate, and address and submit an acceptable identifying document, such as a passport, which must contain some sort of identifying number.
A beneficial owner is anyone who owns or controls at least 25% of the LLC or corporation or exercises substantial control over the LLC or corporation. Substantial control could be anyone who is authorized to make important decisions for the LLC or corporation.
A company applicant is anyone who files the document that created the LLC or corporation, so it could be your attorney or even the person who does it for some online formation service.
When do we have to get this done?
If your LLC or corporation 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 30 days after formation.
As a Company Applicant do I have to report on all entities I formed before the effectiveness of this new law?
I myself was getting nervous about that prospect, having formed many LLCs and corporations for my clients. But no, thankfully, company applicants do not have to report on any companies formed before January 1, 2024.
How do I report this and where?
They are working on electronic systems, forms, and infrastructure to make reporting as easy as possible for the reporting companies. So stay tuned for where to file your reports. They also promised to issue a Small Entity Compliance Guide, in order to inform small entities about their responsibilities under the rule. I am certain to update my LLC and corporation clients on further developments.
See here for an information fact sheet from FinCen. Or this more in-depth article.