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Lawmaker Targets California Companies That Hide Ownership

Lawmaker Targets California Companies That Hide Ownership

State Sen. Maria Elena Durazo speaks at the 2019 Women's March in Los Angeles on Jan. 19, 2019. (Araya Diaz/Getty Images for Women's March Los Angeles)

Jill McLaughlin

Jill McLaughlin

4/19/2024

Updated: 4/21/2024

A California state senator wants the state to require limited liability companies to disclose ownership information with a new bill.
Sen. Maria Elena Durazo (D-Los Angeles), author of Senate Bill 1201, called it a “good governance” bill that would provide more transparency about business owners.
“Some owners can abuse LLCs to shield not only their assets, but also their identities,” Ms. Durazo said during a committee meeting on April 17. “Without owner transparency, we as policy makers and enforcement agencies, and the public lack critical information to make informed policy decisions.”
The anonymity and lack of information also frustrates officials investigating violations by slumlords and companies that file for bankruptcy or are accused of wage theft, she said.
The senator filed a similar bill last year, but that measure was held in suspense by the Senate Appropriation Committee without an explanation. Last year’s bill required names and addresses of every member of an LLC.
This year’s bill would require corporations, LLCs, and real estate investment trusts to report information about their owners on periodic reports filed with the secretary of state and made available to the public.
Existing state law doesn’t require ownership information. If passed, the new law would require the businesses to include names and complete business or home addresses of any owners who exercise substantial control over it.
Anyone who owns 25 percent or more of the equity interest in the corporation or LLC would be included.
The legislation faces opposition from a number of groups, including landlords.
Debra Carlton, an executive vice president for the California Apartment Association, told committee members the bill doesn’t make sense.
“It’s unclear to us why this bill is necessary,” Ms. Carlton said, adding corporations and LLCs already file extensive information with the state and federal government.
Last year’s bill estimated the state would need $9 million to implement the new requirements, and another $3 million each year to comply.
The chamber’s Judiciary Committee passed the legislation on a 9-1 vote April 2, with Sen. Roger Niello (R-Fair Oaks) voting against it. The bill passed another hurdle April 17 when members of the Senate Banking and Financial Institutions Committee approved it in a 5-2 vote. Republican Sens. Janet Nguyen (R-Fountain Valley) and Mr. Niello voted against it.
The committee members declined to discuss the legislation. The bill now moves to the Senate Appropriations Committee.
Last year, New York became the first state to pass a similar bill.
The bill faces several challenges, according to a legislative analysis. The biggest challenge would be for the Secretary of State’s Office to review, investigate, and verify information related to owners.
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Jill McLaughlin

Jill McLaughlin

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Jill McLaughlin is an award-winning journalist covering politics, environment, and statewide issues. She has been a reporter and editor for newspapers in Oregon, Nevada, and New Mexico. Jill was born in Yosemite National Park and enjoys the majestic outdoors, traveling, golfing, and hiking.

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