New York has become the first state in the nation to create a registry to keep track of the beneficial owners of Limited Liability Companies (LLCs) doing business within its borders.
The LLC Transparency Act became law with a stroke of governor Kathy Hochul’s pen on December 23. It didn’t get her signature without key changes to the language approved by both the Assembly and the State Senate six months ago.
“Unlike the bill we passed,” said Ulster County assemblymember Sarahana Shrestha, “the governor’s amendment will not require the data base of LLC beneficial owners to be publicly accessible. It will be available only to state and local governments.”
Originally set to take effect on January 1, 2025, the governor’s changes also pushed back the law’s implementation a year to 2026.
“Still, this is a breakthrough step towards dismantling the anonymity of LLCs and the corruption that comes with it,” said Shrestha. “New York is now the first state in the nation to sign something like this into law.”
A 2020 study by Bard professor Kwame Holmes and his students found that LLCs owned 87 properties in part of midtown Kingston, ten of which shared names with corporate landlords operating in states across the country.
“Generally speaking, LLCs are buying up homes rapidly to extract profits by increasing rents or turning them into short-term rentals,” alleged Shrestha, “and LLCs are especially rampant among illegal Airbnb empires all over the country.”
Currently the owner listed on the paperwork to incorporate an LLC need not be the one(s) profiting from or controlling an interest in the corporation.
”Getting a library card requires more personal information than registering an LLC,” said Shrestha,
Ulster County’s legislature has been months ahead of this effort. While implementation has been so far ineffectual, legislation was passed in March of this year which compels any LLC looking to bid on or sign county contracts to reveal its beneficial members.
The county legislature sent a memorializing resolution to the governor on May 22 supporting the state-level effort co-sponsored by Shrestha, reading in part, “in Ulster County, we have seen limited liability companies based largely in New Jersey or Brooklyn buy up inordinate amounts of real property to operate low-effort, high-rent apartments or full-time short-term rentals, thereby removing vital housing stock from our communities, raising the cost of living, and extracting the wealth from our region for the profit of anonymous beneficiaries.”
Local governments can be subjected to lengthy and disadvantaged court processes when trying to subject LLCs to code enforcement.
Shrestha said she believed that “knowing who your landlord is and being able to reach them is a matter of public safety and should be a basic tenant right.”
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