Business Law

California’s Far-Reaching Version of the CTA Passes in Senate

In a move to raise transparency regarding California business ownership, the California Senate passed SB 1201 on May 16, 2024. This bill, if enacted into law, would impose on all domestic and foreign limited liability companies and corporations the obligation to provide certain information about the beneficial owners of those entities.  “Beneficial owners” are defined as persons (i) holding 25% or more of an entity’s equity interests, or (ii) exercising “substantial control” over the entity, as that term is defined in Section 1010.380 of Title 31 of the Code of Federal Regulations.  Corporations would be required to include the name and complete business or residence address of any such beneficial owner in their annual Statements of Information.  LLCs would be required to include the name and complete business or residence address of any manager and chief executive officers, and if a manager has not been appointed, then this information would be required for the members of the LLC.   SB 1201 would also authorize the Secretary of State to increase fees for foreign and domestic corporations and LLCs when filing their statements of information.  The new law would take effect January 1, 2026.

Unlike the federal Corporate Transparency Act (CTA), which provides that personal information provided to FinCEN is not publicly available, SB 1201 would result in the names and addresses of beneficial owners being readily discoverable on the Secretary of State website.  Companies doing business, or considering doing business, in California, will want to monitor the progress of SB 1201.  Should it pass into law, companies might consider allocating ownership interests differently, with an eye towards bringing individual ownership levels below 25%.  However, it may be more difficult to ensure that an individual is not considered to be exercising “substantial control” over an organization.

This e-Bulletin was prepared by Emily Yukich of Fox Rothschild LLP and is a member of the Corporations Committee of the Business Law Section of the California Lawyers Association. The views expressed herein are those of the author and do not necessarily reflect the views of Fox Rothschild LLP.

Forgot Password

Enter the email associated with you account. You will then receive a link in your inbox to reset your password.

Personal Information

Select Section(s)

CLA Membership is $99 and includes one section. Additional sections are $99 each.