Lawmakers are cracking down on Limited Liability Companies (LLCs), specifically LLCs that are real estate owners in New York City. Government agencies such as the IRS and DOJ are aware of the billions of dollars in hidden assets within LLCs and are introducing legislation to uncover these assets. This legislation is on the heels of the United States enforcing sanctions on Russia amid Russia’s invasion and continuing war in Ukraine. The DOJ believes many Russian Oligarchs own a Pied-à-Terre that serves as a hidden vault for foreign wealth. The legislature has had little reason to push through any reform of New York LLCs, most significantly because NYC has benefitted by permitting global wealth to accumulate behind a corporate veil.
Last week, New York State lawmakers introduced a piece of legislation that will require any person seeking to purchase property through an LLC to submit their identity to the state and include it in their tax returns. This change will directly affect the person who owns the property instead of affecting the entire corporation as a whole.
Todd Kulkin, Partner and Chair of Corporate Division, states, “This legislation’s purpose (i.e., to expose criminals who use shell LLCs to hide their ill-gotten gains) is admirable. Just as important, and not to be overlooked, is the unintended disclosure of domestic and foreign LLC ownership on a public-facing database creates a massive privacy issue. The unique identifier per beneficial owner doesn’t prevent competitors or third parties from ascertaining their identity, which leaves the owners exposed. I suspect that this change will have a chilling effect on Foreign LLC filings and Domestic LLC formation in the State of New York.”
If you are the owner of a New York LLC that holds real estate in New York or New York City, it is essential you are updated to the laws surrounding these entities, and if required, prepare the necessary corporate documents to continue to protect your investments and deal structures. Seek counsel experienced in the formation and maintenance of companies, both in New York and elsewhere. Contact the attorneys at Warren Law Group at (866) WLGROUP or email firstname.lastname@example.org to schedule your complimentary consultation.