USA - NEW YORK Law and Practice Contributed by: Adam S. Walters, Erin C. Borek, Timothy P. Moriarty and Kelly E. Marks, Phillips Lytle LLP
Limited Liability Companies An LLC is presumed to be managed by its mem - bers unless the articles of organization provide that the management is carried on by manag - ers. Except as provided in the operating agree - ment, each member of an LLC is entitled to vote in proportion to the member’s share of current profits. The articles of organization of an LLC may provide for classes or groups of members having such relative rights, powers, preferences and limitations as the operating agreement of such LLC may provide. Members in a member- managed LLC, and managers in a manager- managed LLC, who exercise management pow - ers or responsibilities have the duty of care and loyalty. Limited Partnerships Limited partnerships are managed by at least one general partner. Limited partnership govern - ance is dictated by the terms of the limited part - nership agreement with the limited partnership law setting forth statutory defaults. In order to insulate the limited partners from unlimited liabil - ity, the general partner must be solely respon - sible for the management and operation of the partnership business. The limited partners can - not participate in the management or operation of the business. A limited partner who does take part in the con - trol, management or operation of the business of the limited partnership, including signing any documents on behalf of the partnership in its own capacity as a limited partner, risks being exposed to unlimited liability. The Corporate Transparency Act was passed by Congress in 2021 and the law imposes a new beneficial ownership reporting requirement on entities – both newly-formed and ones that are currently in existence. The objective of the leg -
islation is to make it more difficult for bad actors to shield their identity or facilitate illegal trans - actions through entities which may be opaque to federal governmental authorities in terms of the identity of individuals that own and operate those entities. Unless an exemption for a par - ticular entity is available, effective 1 January 2024, each entity is required to report certain information regarding the entity and individu - als that exercise “substantial control” over the particular entity through an information portal maintained by the Financial Crimes Enforcement Network (FinCEN), which is a bureau within the U.S. Treasury Department. Newly formed entities (ie, entities formed after 1 January 2024) have a limited period of time following formation (90 days in 2024; 30 days in 2025 and thereafter) in which to file their reports if they are not otherwise exempt from the report - ing requirements. Existing entities (ie, entities that were formed prior to 1 January 2024) that are not exempt from the requirements have until 31 December 2024 to file their initial beneficial ownership report with FinCEN. More informa - tion relating to the reporting requirements, the filing portal, exemptions from reporting (in all, there are 23 exemptions available) and all relat - ed information (including the underlying law and regulations) can be found on the FinCEN Ben - eficial Ownership Information reporting page of its website . On 1 March 2024, in the case of National Small Business United v. Yellen, No. 5:22-cv-01448, a Federal District Court in the Northern District of Alabama ruled the Corporate Transparency Act to be unconstitutional. Sub - sequent to the ruling, the U.S. Justice Depart - ment (on behalf of the U.S. Treasury Department) filed a Notice of Appeal as it relates to the case. FinCEN has essentially taken the position that all other reporting companies (aside from the parties involved in the case) remain obligated
1260 CHAMBERS.COM
Powered by FlippingBook