There’s a growing movement among states to require companies to report beneficial information in ways similar to the federal Corporate Transparency Act (CTA). Below are a few bills to watch:
The New York legislature has passed a bill called the LLC Transparency Act that will require domestic and foreign LLCs to report beneficial ownership information to the New York Department of State when they submit a formation or qualification filing or file an amendment. Additionally, LLCs will be required to keep the Department of State updated with any changes to their beneficial ownership information.
If an LLC is exempt from filing reports with FinCEN under the CTA, they will also be exempt from the New York reporting requirements. However, exempt LLCs will have to claim an exemption via a signed statement by a member or manager citing the provision(s) of the CTA under which they are exempt. LLCs formed on or before the effective date of the bill will have until January 1, 2025 to file their initial report or exemption statement. A non-exempt LLC which has failed to file its beneficial ownership information for thirty days after it is due will show up as “past due” in the New York Department of State’s records. A non-exempt LLC which has failed to file its beneficial ownership information for more than two years will show up as “delinquent” in the New York Department of State’s records (after having been sent 60 days’ notice by the Department).
The bill has the same definition of “beneficial owner” as the CTA. LLCs must identify each beneficial owner by: 1) full legal name; 2) date of birth; 3) current business street address; and 4) an identifying number from an acceptable identification document as defined in the CTA. Unlike the CTA, there doesn’t appear to be a requirement to submit an image of the identification document. LLCs can satisfy their disclosure requirements by submitting a copy of their report filed with FinCEN if the information within that report meets the requirements of the New York bill.
The New York Department of State will list the full name of each beneficial owner for every non-exempt LLC in their public database along with other LLC information. The New York Department of State will allow beneficial owners who cite significant privacy interests to apply for a waiver to withhold their full name from being listed publicly.
The bill has not yet been signed by the Governor. It will go into effect 365 days after signature.
The California legislature is considering two bills relating to beneficial ownership reporting: Senate Bills 738 and 594. Both bills are in the early stages of the legislative process.
Senate Bill 738 would require foreign corporations and foreign LLCs to report the full name, residential or business address and email address (if applicable) of each of their beneficial owners on their qualification filing with the California Secretary of State. The bill defines beneficial owner as a “natural person who owns, directly or indirectly, 50 percent or more of the entity interest.” Since qualification filings are public filings, it appears that the beneficial ownership information contained within the qualification filings will be publicly accessible.
Senate Bill 594 would require, among other things, domestic and foreign corporations and domestic and foreign LLCs to include the name and address of their beneficial owner(s) on their Statement of Information filings with the California Secretary of State. The bill defines beneficial owner as a natural person who directly or indirectly exercises substantial control over the entity or who owns 25% or more of the equity interest in the entity. An entity’s disclosed beneficial ownership information would be publicly accessible through the California Secretary of State.
The Massachusetts legislature is considering House Bill 3566 which would require domestic and foreign LLCs to report beneficial ownership to the Massachusetts Secretary of State (the Secretary of the Commonwealth).
In March, the South Dakota legislature passed House Bill 1189 which requires entities to disclose on their annual report filings whether they own any agricultural land and, if so, whether the entity has any foreign beneficial owners.