NY greenlights law to unveil owners of LLCs, but blocks public database. What to know

Limited liability companies in New York will be required to report names of their beneficial owners under a new state law approved by lawmakers and Gov. Kathy Hochul, improving efforts to curb wage theft and other corporate abuses.

Hochul signed the so-called LLC Transparency Act recently after striking a deal to remove a measure that would have publicly disclosed the names of LLC owners. Instead, those names will only be accessible by state regulators and law enforcement.

The new law will make it easier for authorities to hold accountable owners of LLCs. The names were previously cloaked in anonymity because lawyers handled limited liability company filings.

What Hochul, lawmakers say about LLC Transparency Act

State Sen. Brad Hoylman-Sigal, D-Manhattan, and Assemblymember Emily Gallagher, D-Brooklyn, touted the new law as a crucial step towards preventing secretive companies from "exploiting tenants and workers."

In a statement, the two lawmakers who championed the legislation noted the newly accountable groups include "landlords who refuse to properly maintain their buildings, companies stealing wages from workers or abusing the environment, and sanctioned oligarchs buying up Manhattan real estate."

“For far too long, bad actors have been protected by the loose disclosure requirements of LLC ownership,” Hochul said in a statement.

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Why NY public remains in dark

Hoylman-Sigal and Gallagher criticized Hochul for removing the measure to create a publicly available database, which had been included in the bill that passed the Democrat-controlled Legislature earlier this year.

"Disclosure to state and local governments is an important first step, but it is not transparency," they said, adding they plan to continue to pursue that public reporting of LLC owner names.

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Some business and real estate groups — many of which are powerful lobbying spenders and political donors to Hochul — opposed the creation of the public database, citing privacy and security concerns for business owners.

The Business Council asserted the public database would have "put business owners at risk."

"A disgruntled employee could use the information to shame their former employer," the business group said in a statement, adding attorneys could also "abuse the database to bring frivolous and unwarranted lawsuits against businesses in the database, furthering contributing to increasing insurance premiums."

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Why business, property owners use LLCs

The corporate use of LLCs nationally has been common historically for a variety of reasons, spanning from seemingly legitimate personal privacy and legal liability issues to potential tax evasion and money laundering, USA TODAY reported previously.

But many state and federal lawmakers have pushed for improved transparency in recent years, including the 2021 approval of the federal Corporate Transparency Act that takes effect Jan. 1, 2024. That law requires many businesses to report beneficial owners to federal regulators.

This article originally appeared on Rockland/Westchester Journal News: NY greenlights law to unmask LLC owners, but blocks public database