This podcast is part of a series covering the Corporate Transparency Act and CTA requirements for beneficial ownership reporting.
Corporate Transparency Act resources
TRANSCRIPT
Greg Corombos: Hi, I'm Greg Corombos. Our guest in this edition of Expert Insights is Alan Stachura, Senior Manager of Government Relations at CT Corporation. For many organizations, the Corporate Transparency Act has added another layer of complexity when it comes to day-to day compliance. A survey conducted by Wolters Kluwer CT Corporation during a May webinar revealed that accurate reporting — and the ongoing tracking of beneficial ownership status under the Corporate Transparency Act, or CTA — is a top compliance concern. In addition to the CTA, there are also state beneficial owner reporting obligations to consider. For example, in March of this year, New York Governor Kathy Hochul enacted a revised version of a law that requires beneficial owner reporting from qualifying LLCs. So in this edition of Expert Insights, Alan will discuss the latest state developments in regards to beneficial ownership reporting, as well as some of the ongoing compliance requirements that entities subject to the CTA need to stay on top of. This podcast is part of a series focusing on the Corporate Transparency Act and the Act's requirements for beneficial ownership reporting. And Alan, thanks so much for being with us.
Alan Stachura: Absolutely, great to be here with you.
Greg Corombos: Well, to begin with, explain the New York law on beneficial ownership reporting in a little more detail,
Alan Stachura: The New York law, which is called the New York LLC Transparency Act, was really modeled after the federal Corporate Transparency Act. It requires non-exempt LLCs formed in New York, or non-exempt LLCs that are authorized or registered to do business in New York, to file a disclosure with the New York Department of State, which contains the company's information on their beneficial owners, as well as each company applicant. The earliest reporting date is January 1 of 2026, which is when the law goes into effect. So new LLCs that are formed on or after January 1 of 2026, along with foreign LLCs authorized to do business in the state starting in 2026, will need to electronically file beneficial ownership disclosures within 30 days of an initial filing of their Articles of Organization or Application for Authority, unless they qualify for and complete the process for an exemption in New York State. New York LLCs that are formed or authorized prior to 2026 will have a full year, or until January 1 of 2027, to comply, unless they are exempt. And of course, there are penalties for non-compliance, which include fines for late filings, including a fine of up to $500 per day, and possible action to dissolve an LLC or cancel or annul authorization for an LLC to do business in New York. Now, one thing to be aware of is [that] just as FinCEN has had to provide a lot of guidance to fill the gaps, to clarify any ambiguities in some of their rules. There are certainly a lot of details that the New York State folks will need to provide as reporting begins in 2026.
Greg Corombos: So, Alan, we've talked in this series about the compliance requirements for the Federal CTA, and you've gone through now what's required in New York State. So how does New York's transparency law differ from the Corporate Transparency Act?
Alan Stachura: One of the biggest things is that obviously this is a state reporting requirement as opposed to a federal one. But the New York law differs from the CTA in many other ways. First, the New York law is limited to LLCs, whereas the CTA affects non-exempt entities that were formed or registered through a filing with the state, including LLCs and corporations. Another way that they differ is that the New York law has an annual filing requirement. Once the initial beneficial ownership disclosure has been filed with the state, reporting companies must file an annual statement to confirm or update the beneficial ownership disclosure information along with other information. The CTA does not have that annual filing requirement. Reporting companies only need to submit a new filing to FinCEN for changes or corrections to information on the beneficial owners and reporting company. A third way in which they differ is how exemptions are handled. Under the federal CTA, a company is automatically excused from the Act's reporting requirements if it meets one of the 23 exemptions. An LLC in New York can qualify for an exemption from the state reporting requirements if it meets one of the 23 exemptions, as outlined in the CTA. But an LLC in New York would need to take the additional step of filing an Attestation of Exemption under the penalty of perjury with the New York Department of State, along with meeting annual requirements pertaining to beneficial ownership and exemption status. New York will also accept either a current home address or business address for the beneficial owner and company applicant, and there is no need to include a copy of a valid identification document with the disclosure filing. And at the moment, New York does not have an equivalent to a FinCEN ID, which may raise some privacy issues for companies when it comes to the handling of personal information of the owners and applicants that need to submit their information to the state.
Greg Corombos: Alan, we've talked a lot about New York State and its requirements in this area. What other states have a reporting requirement for beneficial ownership?
Alan Stachura: Currently, there's only one other jurisdiction that has a similar requirement, and that's the District of Columbia, or Washington, DC. DC’s law has been in effect since 2020, and it extends to all entities formed or registered to do business in DC, not just LLCs. Also the collection of beneficial ownership information is built into DC’s initial formation or registration process and also in their biennial reporting process. However, there are other states that have been trying to enact legislation requiring companies to disclose beneficial ownership information at the state level. These include Massachusetts, California, and Maryland.
Greg Corombos: So now we move from information to action a little bit here. So regarding the reporting obligations under the Corporate Transparency Act, what do organizations need to keep in mind here?
Alan Stachura: Sure. I think the biggest one is that there's a major reporting deadline coming up for reporting companies that were formed or registered before 2024. These companies need to make sure that they file their initial report with FinCEN by January 1 of 2025. Keep in mind that reporting companies that were formed or registered in this year — in 2024 — or next year have a much shorter window to file. If you have any dissolved entities, you'll also need to make sure that you still file an initial beneficial ownership information or BOI report if that entity had active status at any point on or after January 1 of 2024, and met the criteria for a reporting company and also did not qualify for an exemption. You also need to factor in BOI compliance, if you're planning on any major business transactions, such as acquisitions or spin-offs. These could trigger having to file an updated or new BOI report, and this is in addition to having to keep on top of all of the changes to information on reporting companies and beneficial owners, since you are required to submit any changes to FinCEN within 30 days.
Greg Corombos: Alan, there's so much good information here, and I know it's going to help make things clearer for a lot of people. Thank you so much for your time today, as well as your expertise.
Alan Stachura: Absolutely. Glad to help.
Greg Corombos: Alan Stachura is a Senior Manager of Government Relations at CT Corporation. I'm Greg Corombos, reporting for Expert Insights. For more information on this topic, please visit ctcorporation.com.
