# Newer Law — David Mitchell, Esq. > U.S. counsel for founders, investors, and international businesses. Newer Law is the New York law practice of David Mitchell, Esq., a solo attorney advising founders, investors, and international businesses on U.S. legal matters. The practice works at the intersection of corporate law, cross-border transactions, business immigration, and the legal framework for artificial intelligence and AI agents. Every engagement is handled personally by the principal, from analysis through execution. Engagements are accepted selectively. - Attorney: David Mitchell, Esq. — admitted in New York - Location: 43 West 43rd Street, Ste. 212, New York, NY 10036, USA - Contact: david@newerlaw.com · (646) 535-9065 · Office meetings by appointment. - Serves: Admitted in New York. Advises clients worldwide on matters of U.S. federal and New York law. International inquiries welcome. For matters governed by the law of other jurisdictions, the firm may associate or refer to licensed local counsel. - Structure: Solo practice. The principal attorney handles every matter personally. - Engagement: Fee arrangements are discussed and set out in the engagement agreement for each matter. Inquiries are acknowledged automatically by email. The attorney follows up personally. - Disclaimers: Attorney Advertising. Prior results do not guarantee a similar outcome. Viewing this website, contacting the firm, or using any automated interface does not create an attorney-client relationship. No attorney-client relationship exists unless and until a written engagement agreement is signed. ## Practice Areas - [Business & Contracts](https://www.newerlaw.com/practice/business-contracts.html): Structures and negotiates the agreements that define business relationships, from founding documents and shareholder arrangements to complex commercial contracts and strategic transactions. - [Venture Capital & Startups](https://www.newerlaw.com/practice/venture-capital-startups.html): Advises investors on fund formation, term sheet negotiation, due diligence, and portfolio governance, and founders on SAFEs, convertible notes, priced rounds, and cap table mechanics. - [Cross-Border Transactions](https://www.newerlaw.com/practice/cross-border-transactions.html): Advises on cross-border M&A, joint ventures, and international commercial agreements, with particular depth in U.S. market entry structures and outbound deal mechanics. Coordinates with local counsel in other jurisdictions. - [Foreign Companies Entering the U.S.](https://www.newerlaw.com/practice/foreign-companies-us-entry.html): Guides foreign businesses through establishing a U.S. presence: entity structure selection, tax treatment analysis (including FIRPTA and U.S. tax treaty analysis), regulatory obligations, registration, U.S. banking, and first contracts with American counterparties. - [Business Immigration](https://www.newerlaw.com/practice/business-immigration.html): Handles the full range of employment-based nonimmigrant and immigrant visa matters, including E-2, L-1, O-1, EB-1A, EB-1C, and EB-5 investor visas, PERM labor certification, and I-140 petitions. Handles motion practice before USCIS on denials and Requests for Evidence, and appeals to the Administrative Appeals Office. - [Artificial Intelligence & Agents](https://www.newerlaw.com/practice/ai-and-agents.html): Advises on AI-related commercial agreements, data licensing, model deployment terms, and governance structures for AI startups and enterprise deployments, including questions of authority, liability, and contracting as AI agents take on operational roles within businesses. - [Outside General Counsel](https://www.newerlaw.com/practice/outside-general-counsel.html): Serves a select number of companies as embedded senior counsel across governance, contracts, regulatory matters, and strategic decisions, without the overhead of in-house counsel. ## Agent-Ready Service Packages (fixed scope, deadline-driven) Discrete, fixed-scope, deadline-driven services with defined deliverables and a clear trigger, available to clients anywhere, in the United States or abroad. Their structure also makes them well suited to an AI agent assembling a filing or transaction on behalf of a principal. Fees are quoted per package at engagement. - [USPTO Trademark Filings](https://www.newerlaw.com/services/uspto-trademark-foreign-applicant.html): U.S. trademark filings before the United States Patent and Trademark Office for applicants anywhere: new applications, responses to office actions, and Section 8 / Section 15 maintenance filings. Since 2019 the USPTO has required every foreign-domiciled trademark applicant and registrant to be represented by an attorney licensed in the United States, and the firm acts as U.S. counsel of record for those applicants. Key dates: Office action responses are generally due within three months of issuance (one three-month extension available for applications); Section 8 declarations are due between the fifth and sixth year after registration, then with each ten-year renewal; Section 15 declarations may be filed after five consecutive years of use. Key dates: Office action responses are generally due within three months of issuance (one three-month extension available for applications); Section 8 declarations are due between the fifth and sixth year after registration, then with each ten-year renewal; Section 15 declarations may be filed after five consecutive years of use (JSON: https://www.newerlaw.com/api/packages/uspto-trademark-foreign-applicant) - [New York LLC Transparency Act Filings for Foreign LLCs](https://www.newerlaw.com/services/ny-llc-transparency-act.html): Under the New York LLC Transparency Act, effective January 1, 2026, a limited liability company formed under the law of a foreign country and authorized to do business in New York must file either a beneficial ownership disclosure statement or an attestation of exemption with the New York Department of State. LLCs already authorized before January 1, 2026 must file by December 31, 2026; LLCs authorized on or after that date file within 30 days. LLCs formed in New York or any other U.S. state are exempt from the requirement, because the Act takes its definition of reporting company from the federal rules, which now cover only foreign-formed entities. The firm determines whether a disclosure or an attestation applies, prepares it, and files it. Key dates: December 31, 2026: filing deadline for foreign-country LLCs authorized to do business in New York before January 1, 2026; Foreign-country LLCs authorized to do business in New York on or after January 1, 2026: filing due within 30 days after the application for authority; Annually thereafter: a disclosure statement or attestation of exemption confirming or updating the prior filing (JSON: https://www.newerlaw.com/api/packages/ny-llc-transparency-act) - [Federal Corporate Transparency Act Filings for Foreign Entities](https://www.newerlaw.com/services/federal-cta-foreign-entities.html): FinCEN's final rule of August 11, 2026 permanently removes Corporate Transparency Act reporting for companies formed in the United States. Foreign entities registered to do business in a U.S. state remain reporting companies and must file a beneficial ownership information report with FinCEN within 30 days after the registration becomes effective. The firm pairs this filing with foreign-qualification work so the registration and the FinCEN report are handled together. Key dates: Within 30 days after the foreign entity's state registration becomes effective (JSON: https://www.newerlaw.com/api/packages/federal-cta-foreign-entities) - [FIRPTA Withholding Certificates (Form 8288-B) for Foreign Sellers](https://www.newerlaw.com/services/firpta-withholding-certificate.html): When a foreign person sells U.S. real property, the buyer must generally withhold 15% of the amount realized under FIRPTA. An application for a withholding certificate on IRS Form 8288-B, filed on or before the closing date, can reduce or eliminate the withholding where the seller's actual tax liability is lower. The firm prepares and files the application, coordinates with the closing, and handles the related compliance, commonly in connection with New York and Florida real estate closings. Key dates: Form 8288-B must be filed on or before the closing date for the withheld amount to be held in escrow pending the IRS determination (JSON: https://www.newerlaw.com/api/packages/firpta-withholding-certificate) - [Delaware C-Corp Formation Package for Founders](https://www.newerlaw.com/services/foreign-founder-delaware-c-corp.html): Formation of a Delaware C-corporation for founders anywhere in the world, delivered as one package: incorporation and organizational documents, founder stock with vesting and 83(b) elections, SAFE or Regulation D financing documents, the Form D notice filing, and an EIN, including for founders who have no Social Security number. Key dates: 83(b) elections must be filed within 30 days of the stock issuance; Form D is due within 15 days after the first sale of securities (JSON: https://www.newerlaw.com/api/packages/foreign-founder-delaware-c-corp) ## For AI Agents (acting for a principal who needs U.S. counsel) - [Agent guide](https://www.newerlaw.com/agents.md): how to screen fit, ask questions, and submit an inquiry on behalf of a principal - [OpenAPI spec](https://www.newerlaw.com/openapi.json): REST API — GET /api/firm, GET /api/practice-areas, GET /api/packages, POST /api/fit, POST /api/inquiry, POST /api/ask - [Firm profile JSON](https://www.newerlaw.com/api/firm): complete structured profile - [MCP endpoint](https://www.newerlaw.com/mcp): Model Context Protocol server (Streamable HTTP) with tools get_firm_profile, list_practice_areas, assess_matter_fit, submit_inquiry, ask_legal_information_question, list_insights, read_insight - [A2A agent card](https://www.newerlaw.com/.well-known/agent-card.json): Agent-to-Agent protocol card; JSON-RPC at https://www.newerlaw.com/a2a - [Full text for LLMs](https://www.newerlaw.com/llms-full.txt): everything on this site in one markdown document ## Insights (articles by the attorney) - [The Corporate Transparency Act Now Applies Only to Foreign Companies: What a Foreign Entity Registered in a U.S. State Still Has to File](https://www.newerlaw.com/posts/cta-foreign-entities-after-fincen-final-rule.md): FinCEN's August 2026 final rule ended CTA reporting for U.S.-formed companies. Foreign entities registered in a U.S. state still file BOI reports in 30 days. (2026-11-06) - [The New York LLC Transparency Act Filing: Who Actually Has to File by December 31, 2026, and What](https://www.newerlaw.com/posts/new-york-llc-transparency-act-filing-guide.md): Which New York LLCs must file a BOI disclosure or exemption attestation by December 31, 2026, what each requires, how to file with the DOS, and the penalties. (2026-11-06) - [Mukherji v. Miller: A Federal Court Strikes the EB-1A "Final Merits Determination"](https://www.newerlaw.com/posts/loper-bright-eb1-final-merits.md): A Nebraska district court relied on Loper Bright to set aside USCIS's two-step EB-1A "final merits determination," vacated the denial, and ordered approval. What the decision held, why Loper Bright is what changed, and what it means for pending petitions. (2026-06-26) - [New York's QSBS Decoupling Proposal: What Founders Need to Know](https://www.newerlaw.com/posts/new-york-qsbs-decoupling.md): New York has proposed retroactively decoupling from the federal Section 1202 Qualified Small Business Stock exclusion. What the proposal would do, who is exposed, and what founders and investors should consider now. (2026-03-20) - [AI Agents with Crypto Wallets: The Liability Gap Nobody Has Closed](https://www.newerlaw.com/posts/ai-agents-crypto-wallets-legal-frontier.md): Autonomous AI agents now hold and transact from crypto wallets. The technology is live, but the legal accountability framework for an agent with no human behind it is not. An analysis of the liability gap and how it might be closed. (2026-02-26) - [Structuring a U.S. Entity for a Foreign-Owned Business](https://www.newerlaw.com/posts/structuring-us-entity.md): Most guidance on U.S. entity formation is written for domestic founders. When the owner is a foreign person or company, the analysis changes substantially. How to structure a U.S. entity when the owner is foreign. (2026-02-10) - [What Foreign Companies Get Wrong About U.S. Entity Selection](https://www.newerlaw.com/posts/foreign-companies-entity-selection.md): Foreign companies entering the U.S. market frequently choose an entity based on a single factor. The tax and liability implications most foreign counsel underestimate. (2026-01-28) - [SAFEs, Side Letters, and Stealth Governance](https://www.newerlaw.com/posts/safe-not-simple.md): The SAFE was designed to give early investors no governance rights. Side letters and related instruments can quietly reintroduce them. What founders should look for before signing. (2026-01-14) - [EB-5 After the Reform Act](https://www.newerlaw.com/posts/eb5-after-reform-act.md): The EB-5 Reform and Integrity Act of 2022 restructured the immigrant investor program: higher investment amounts, set-aside categories, and a rebuilt regional center regime. What investors need to know now. (2025-12-19) ## Optional - [Privacy policy](https://www.newerlaw.com/privacy.html) - [Website (HTML)](https://www.newerlaw.com/) --- # Full Profile ## About the Firm Newer Law is the New York law practice of David Mitchell, Esq., a solo attorney advising founders, investors, and international businesses on U.S. legal matters. The practice works at the intersection of corporate law, cross-border transactions, business immigration, and the legal framework for artificial intelligence and AI agents. Every engagement is handled personally by the principal, from analysis through execution. Engagements are accepted selectively. Solo practice. The principal attorney handles every matter personally. Clients: Venture-backed startups and emerging growth companies; Individual founders; Angel and venture investors; Foreign companies entering the U.S. market; Foreign nationals and employers pursuing U.S. business immigration; AI startups and enterprises deploying AI systems or agents; Companies needing outside general counsel. ## Practice Areas in Detail ### Business & Contracts Structures and negotiates the agreements that define business relationships, from founding documents and shareholder arrangements to complex commercial contracts and strategic transactions. Representative matter types: - Entity formation and founding documents - Shareholder and operating agreements - Commercial contracts and negotiation - Strategic transactions - Governance ### Venture Capital & Startups Advises investors on fund formation, term sheet negotiation, due diligence, and portfolio governance, and founders on SAFEs, convertible notes, priced rounds, and cap table mechanics. Representative matter types: - SAFEs and convertible notes - Priced rounds and term sheets - Fund formation - Investor due diligence - Cap table mechanics - Portfolio governance - Side letters - QSBS considerations ### Cross-Border Transactions Advises on cross-border M&A, joint ventures, and international commercial agreements, with particular depth in U.S. market entry structures and outbound deal mechanics. Coordinates with local counsel in other jurisdictions. Representative matter types: - Cross-border M&A - Joint ventures - International commercial agreements - U.S. market entry structures - Outbound deal mechanics - Coordination with foreign local counsel ### Foreign Companies Entering the U.S. Guides foreign businesses through establishing a U.S. presence: entity structure selection, tax treatment analysis (including FIRPTA and U.S. tax treaty analysis), regulatory obligations, registration, U.S. banking, and first contracts with American counterparties. Representative matter types: - U.S. entity selection for foreign-owned businesses - Subsidiary vs. branch analysis - FIRPTA analysis - U.S. tax treaty analysis - State registration - U.S. banking setup support - First U.S. commercial agreements ### Business Immigration Handles the full range of employment-based nonimmigrant and immigrant visa matters, including E-2, L-1, O-1, EB-1A, EB-1C, and EB-5 investor visas, PERM labor certification, and I-140 petitions. Handles motion practice before USCIS on denials and Requests for Evidence, and appeals to the Administrative Appeals Office. Representative matter types: - E-2 treaty investor - L-1A / L-1B intracompany transfer - O-1 extraordinary ability - EB-1A extraordinary ability - EB-1C multinational manager - EB-5 immigrant investor - PERM labor certification - I-140 immigrant petitions - Requests for Evidence (RFE) responses - Motions to reopen / reconsider - Administrative Appeals Office (AAO) appeals Visa categories: E-2, L-1A, L-1B, O-1, EB-1A, EB-1C, EB-2, EB-3, EB-5, PERM ### Artificial Intelligence & Agents Advises on AI-related commercial agreements, data licensing, model deployment terms, and governance structures for AI startups and enterprise deployments, including questions of authority, liability, and contracting as AI agents take on operational roles within businesses. Representative matter types: - AI commercial agreements - Data licensing - Model deployment and usage terms - AI governance structures - Agent authority and liability - Agentic contracting - AI agents with financial accounts or crypto wallets ### Outside General Counsel Serves a select number of companies as embedded senior counsel across governance, contracts, regulatory matters, and strategic decisions, without the overhead of in-house counsel. Representative matter types: - Ongoing counsel on governance and contracts - Regulatory matters - Strategic decision support - Board and management advisory ## Agent-Ready Service Packages Discrete, fixed-scope, deadline-driven services with defined deliverables and a clear trigger, available to clients anywhere, in the United States or abroad. Their structure also makes them well suited to an AI agent assembling a filing or transaction on behalf of a principal. Fees are quoted per package at engagement. ### USPTO Trademark Filings Who it is for: Businesses, founders, and online sellers anywhere, in the United States or abroad, seeking U.S. trademark registration or maintaining existing registrations. Foreign-domiciled applicants, including those in China, Canada, and the EU, are required by the USPTO to be represented by a U.S.-licensed attorney. U.S. trademark filings before the United States Patent and Trademark Office for applicants anywhere: new applications, responses to office actions, and Section 8 / Section 15 maintenance filings. Since 2019 the USPTO has required every foreign-domiciled trademark applicant and registrant to be represented by an attorney licensed in the United States, and the firm acts as U.S. counsel of record for those applicants. Key dates: Office action responses are generally due within three months of issuance (one three-month extension available for applications); Section 8 declarations are due between the fifth and sixth year after registration, then with each ten-year renewal; Section 15 declarations may be filed after five consecutive years of use. Deliverables: - U.S. attorney of record for foreign-domiciled applicants and registrants - Trademark application preparation and filing (TEAS) - Office action responses - Section 8 declarations of continued use and Section 15 declarations of incontestability - Renewals and post-registration maintenance Key dates: - Office action responses are generally due within three months of issuance (one three-month extension available for applications) - Section 8 declarations are due between the fifth and sixth year after registration, then with each ten-year renewal - Section 15 declarations may be filed after five consecutive years of use Why it suits agent-driven intake: Fixed deliverables, statutory deadlines, and a mandatory U.S.-attorney requirement that an agent cannot satisfy on its own. Inquiry: POST https://www.newerlaw.com/api/inquiry with "matter.servicePackage": "uspto-trademark-foreign-applicant" ### New York LLC Transparency Act Filings for Foreign LLCs Who it is for: Limited liability companies formed under the law of a country other than the United States that are authorized to do business in New York, and the agents, accountants, and registered-agent services that manage them. Under the New York LLC Transparency Act, effective January 1, 2026, a limited liability company formed under the law of a foreign country and authorized to do business in New York must file either a beneficial ownership disclosure statement or an attestation of exemption with the New York Department of State. LLCs already authorized before January 1, 2026 must file by December 31, 2026; LLCs authorized on or after that date file within 30 days. LLCs formed in New York or any other U.S. state are exempt from the requirement, because the Act takes its definition of reporting company from the federal rules, which now cover only foreign-formed entities. The firm determines whether a disclosure or an attestation applies, prepares it, and files it. Deliverables: - Determination of whether the LLC is a reporting company under the Act and whether a disclosure statement or an attestation of exemption applies - Identification of reportable non-U.S. beneficial owners and applicants and collection of their information - Preparation and electronic filing of the beneficial ownership disclosure statement or attestation of exemption with the New York Department of State, including the filing fee - Calendar and handling of the annual statement and of any update required by a change in ownership or exemption status Key dates: - December 31, 2026: filing deadline for foreign-country LLCs authorized to do business in New York before January 1, 2026 - Foreign-country LLCs authorized to do business in New York on or after January 1, 2026: filing due within 30 days after the application for authority - Annually thereafter: a disclosure statement or attestation of exemption confirming or updating the prior filing Why it suits agent-driven intake: Defined trigger, defined deadline, and a short list of inputs. An agent can collect the entity and ownership data; the firm makes the reporting-company determination and files. Inquiry: POST https://www.newerlaw.com/api/inquiry with "matter.servicePackage": "ny-llc-transparency-act" ### Federal Corporate Transparency Act Filings for Foreign Entities Who it is for: Companies formed outside the United States that are registered, or about to register, to do business in any U.S. state, and the U.S.-based founders, officers, registered agents, and advisers handling that registration for them. FinCEN's final rule of August 11, 2026 permanently removes Corporate Transparency Act reporting for companies formed in the United States. Foreign entities registered to do business in a U.S. state remain reporting companies and must file a beneficial ownership information report with FinCEN within 30 days after the registration becomes effective. The firm pairs this filing with foreign-qualification work so the registration and the FinCEN report are handled together. Deliverables: - Reporting-company and exemption analysis - Beneficial-owner and company-applicant identification - FinCEN BOI report preparation and filing - Foreign qualification (certificate of authority) in the relevant state - Updates and corrected reports Key dates: - Within 30 days after the foreign entity's state registration becomes effective Why it suits agent-driven intake: Clear trigger (state registration), short fixed deadline, and a natural bundle with the registration itself. Inquiry: POST https://www.newerlaw.com/api/inquiry with "matter.servicePackage": "federal-cta-foreign-entities" ### FIRPTA Withholding Certificates (Form 8288-B) for Foreign Sellers Who it is for: Foreign individuals and entities selling U.S. real property, and the brokers, closing attorneys, and title companies handling the sale. When a foreign person sells U.S. real property, the buyer must generally withhold 15% of the amount realized under FIRPTA. An application for a withholding certificate on IRS Form 8288-B, filed on or before the closing date, can reduce or eliminate the withholding where the seller's actual tax liability is lower. The firm prepares and files the application, coordinates with the closing, and handles the related compliance, commonly in connection with New York and Florida real estate closings. Deliverables: - Eligibility and tax-liability analysis - Form 8288-B preparation and filing with supporting documentation - ITIN coordination where the seller has no U.S. taxpayer number - Coordination with closing counsel, title, and the withholding agent on escrow of the withheld amount - Related Form 8288 / 8288-A compliance Key dates: - Form 8288-B must be filed on or before the closing date for the withheld amount to be held in escrow pending the IRS determination Why it suits agent-driven intake: Discrete scope, deadline tied to the closing date, and a federal tax matter that does not depend on the state where the property sits. Inquiry: POST https://www.newerlaw.com/api/inquiry with "matter.servicePackage": "firpta-withholding-certificate" ### Delaware C-Corp Formation Package for Founders Who it is for: Founders anywhere, in the United States or abroad, forming a venture-ready Delaware C-corporation, and the accelerators, incubators, and agents helping them. Formation of a Delaware C-corporation for founders anywhere in the world, delivered as one package: incorporation and organizational documents, founder stock with vesting and 83(b) elections, SAFE or Regulation D financing documents, the Form D notice filing, and an EIN, including for founders who have no Social Security number. Deliverables: - Delaware C-corp formation: certificate of incorporation, bylaws, organizational consents - Founder stock purchase agreements with vesting and 83(b) elections - SAFE or Regulation D offering documents - Form D filing with the SEC and state notice filings - EIN procurement for founders without an SSN or ITIN - Registered agent and foreign-qualification coordination Key dates: - 83(b) elections must be filed within 30 days of the stock issuance - Form D is due within 15 days after the first sale of securities Why it suits agent-driven intake: Standard inputs, standard documents, two hard deadlines (83(b) within 30 days, Form D within 15 days of the first sale). An agent can gather founder and investor details; the firm forms the company and files. Inquiry: POST https://www.newerlaw.com/api/inquiry with "matter.servicePackage": "foreign-founder-delaware-c-corp" ## Adjacent Areas When a matter touches an area the firm does not handle directly, the firm typically handles the business, structural, cross-border, and tax-analysis layer and engages co-counsel or refers a specialist for the specialized component. - Litigation / courtroom work: Litigation is referred to or co-counseled with litigators. The firm can advise on the underlying commercial, governance, or cross-border issues. - Real estate closings: Closings are handled by real estate counsel. The firm advises on entity structuring, FIRPTA, and cross-border tax analysis for foreign purchasers. - Tax return preparation and filing: Filing is handled by an accountant. The firm advises on structural and treaty analysis. - Family-based and humanitarian immigration: The firm's immigration practice is employment- and investment-based. Family and humanitarian matters are referred. Not handled: Criminal defense; Personal injury; Family law; Consumer bankruptcy; Wills, trusts and estates. ## How Engagement Works 1. Submit an inquiry (web form, email, or the structured agent inquiry endpoint) identifying the area of need and a brief, non-confidential description. 2. An automated acknowledgment is sent to the email address provided. The attorney reviews the inquiry personally. 3. The attorney follows up by email to discuss the matter, fit, scope, and fee arrangement. An initial strategic consultation may be arranged. 4. If both sides proceed, a written engagement agreement is signed. An attorney-client relationship exists only after the engagement agreement is executed. 5. Work begins. The principal attorney handles the matter directly from analysis through execution. Fees: Fee arrangements are discussed and set out in the engagement agreement for each matter. Confidentiality: Do not transmit confidential information prior to a signed engagement agreement. Inquiries should contain only non-confidential, general descriptions of the matter. Conflict check: Before engagement, the firm checks for conflicts of interest. Agents may include the names of the principal and of any counterparties in an inquiry to accelerate the conflict check. ## Representative Matters Identifying details modified. Illustrative of the firm's work. Prior results do not guarantee a similar outcome. - **The Founder Who Almost Signed Away His Company** (Venture Capital · Term Sheet). A founder days from signing a term sheet containing a provision that would have given the investor effective veto power over all major decisions. Review and redline removed the clause before execution. Result: Harmful clause removed. Founder retained majority governance rights. - **The Acquisition That Nearly Collapsed on a Foreign Clause** (Cross-Border · M&A). A U.S. buyer days from closing on a European target when an unresolved change-of-control provision surfaced under the target's home jurisdiction law. Coordinated with local counsel, restructured closing mechanics, kept the deal on track. Result: Deal closed on schedule. Liability exposure eliminated before signing. - **The Startup That Needed Its CTO in New York** (Business Immigration · L-1A). A Series A company needed its lead engineer transferred from London. Prior visa denial, compressed timeline. An L-1A petition emphasizing managerial capacity secured approval through premium processing. Result: L-1A approved. Principal relocated and operational within eight weeks. ## Disclaimers - Attorney Advertising. Prior results do not guarantee a similar outcome. - Viewing this website, contacting the firm, or using any automated interface does not create an attorney-client relationship. No attorney-client relationship exists unless and until a written engagement agreement is signed. - Information provided on this website and through its automated interfaces is general legal information, not legal advice. - Nothing on this website is intended to state or imply that any attorney is a specialist or expert in any particular field of law. New York does not certify specialists in legal practice areas. - David Mitchell is admitted to practice law in the State of New York. For matters governed by the law of other jurisdictions, the firm may associate or refer to licensed local counsel as appropriate. - This website is intended to comply with the New York Rules of Professional Conduct. ## Contact David Mitchell, Esq. 43 West 43rd Street, Ste. 212, New York, NY 10036 david@newerlaw.com · (646) 535-9065 --- # Insights (full text) # The Corporate Transparency Act Now Applies Only to Foreign Companies: What a Foreign Entity Registered in a U.S. State Still Has to File *Cross-Border · November 6, 2026 · David Mitchell, Esq.* > FinCEN's August 2026 final rule ended CTA reporting for U.S.-formed companies. Foreign entities registered in a U.S. state still file BOI reports in 30 days. Canonical: https://www.newerlaw.com/posts/cta-foreign-entities-after-fincen-final-rule.html Author: David Mitchell, Esq. — https://www.newerlaw.com --- ## Key takeaways * A company formed under foreign law and registered to do business in any U.S. state or tribal jurisdiction is still a reporting company under the Corporate Transparency Act and must file a BOI report with FinCEN within 30 calendar days after its registration becomes effective. * FinCEN's final rule of August 11, 2026 (91 FR 52508, effective August 14, 2026) made permanent the March 2025 interim rule's exemption of every U.S.-formed entity and of U.S.-person beneficial owners, and added an exemption for U.S.-person company applicants. * A foreign reporting company reports only its non-U.S. beneficial owners and applicants, but the company-level report is still due even if every owner is a U.S. person. * A foreign LLC authorized in New York files twice: a FinCEN BOI report within 30 days of notice that its registration is effective, and a New York LLC Transparency Act disclosure or exemption attestation within 30 days of filing its application for authority, with annual statements thereafter. Yes. A company formed under the law of a foreign country that is registered to do business in any U.S. state or tribal jurisdiction is still a reporting company under the Corporate Transparency Act, and it must file a beneficial ownership information (BOI) report with FinCEN within 30 calendar days after its registration becomes effective. FinCEN's final rule of August 11, 2026 permanently removed reporting for companies formed in the United States and for U.S.-person owners and applicants, but it left the foreign-company obligation, the 30-day clock, and the penalties for willful noncompliance exactly where the March 2025 interim rule put them. The answer surprises many foreign owners, because nearly everything written about the Act lately has been about its retreat. The retreat was real; it simply did not reach foreign-formed companies qualified to do business in a U.S. state. ## From Interim Rule to Final Rule The Act, codified at [31 U.S.C. § 5336](https://www.law.cornell.edu/uscode/text/31/5336), originally reached roughly 32 million entities. In March 2025, after injunctions and a Treasury announcement that it would not enforce the rule against U.S. citizens or domestic companies, FinCEN issued an [interim final rule](https://www.federalregister.gov/documents/2025/03/26/2025-05199/beneficial-ownership-information-reporting-requirement-revision-and-deadline-extension) (90 FR 13688, effective March 26, 2025). It redefined "reporting company" to cover only foreign-formed entities registered in a state or tribal jurisdiction, used the Treasury Secretary's exemption authority under § 5336(a)(11)(B)(xxiv) to carve out every domestically formed entity, and relieved foreign reporting companies from reporting any beneficial owner who is a United States person. On August 11, 2026, FinCEN adopted that interim rule as a [final rule](https://www.federalregister.gov/documents/2026/08/14/2026-16576/beneficial-ownership-information-reporting-requirement-revision) (91 FR 52508), effective on publication on August 14, 2026. It made three limited changes, all toward less reporting: a foreign reporting company no longer reports U.S.-person company applicants; U.S. persons holding a FinCEN identifier no longer have to keep it updated; and FinCEN committed to a one-time sweep deleting the BOI of U.S. companies and U.S. persons already in its database. On the point that matters to foreign companies, the preamble is blunt: Treasury "was not persuaded by commenters' arguments that a 30-day filing period was unreasonably short," and the timing provisions were adopted without change. Date Event January 1, 2024 Original BOI reporting rule takes effect for domestic and foreign reporting companies. March 26, 2025 Interim final rule published and effective (90 FR 13688). Reporting narrowed to foreign-formed entities; U.S.-person beneficial owners exempted. April 25, 2025 Deadline for foreign companies registered before March 26, 2025 to file initial, updated, or corrected reports. August 11, 2026 FinCEN issues the final rule adopting the interim rule with limited changes. August 14, 2026 Final rule published and effective (91 FR 52508). U.S.-person company applicants exempted; FinCEN ID update duty lifted for U.S. persons. December 31, 2026 New York Department of State deadline for foreign-country LLCs authorized in New York before January 1, 2026 to file under the LLC Transparency Act. February 10, 2027 Cut-off for FinCEN's one-time deletion sweep: U.S.-person BOI included in filings after this date will not be purged. ## Who Is a Reporting Company Now Under [31 CFR § 1010.380(c)(1)](https://www.ecfr.gov/current/title-31/subtitle-B/chapter-X/part-1010/subpart-C/section-1010.380) as revised, a reporting company is any corporation, limited liability company, or other entity that is formed under the law of a foreign country and is registered to do business in any state or tribal jurisdiction by filing a document with a secretary of state or similar office. The entity must be foreign-formed: a Delaware LLC owned entirely by a foreign parent is not a reporting company, because § 1010.380(c)(2)(xxiv) now exempts every entity created by a filing with a U.S. state or tribal office, whoever owns it. And the entity must have registered: a foreign company doing business in the United States without an application for authority has not triggered the Act. The trigger is the certificate of authority, not the activity behind it. This is why the obligation so often arrives bundled with foreign qualification. A German GmbH that registers in New York to sign a lease becomes a reporting company the day that registration takes effect. The firm therefore handles the FinCEN report within its [foreign-qualification and CTA filing service](https://www.newerlaw.com/services/federal-cta-foreign-entities.html), on one calendar with the state registration. By FinCEN's own estimate there are roughly 28,000 non-exempt foreign reporting companies, of which about 13,000 had filed by December 31, 2025. ## What Must Be Reported, and the U.S.-Person Carve-Out The report has two layers. The company layer, under § 1010.380(b)(1)(i), consists of the entity's full legal name, any trade names, the street address of its principal place of business in the United States, its foreign jurisdiction of formation, the state or tribal jurisdiction where it first registered, and its IRS taxpayer identification number or, if none has been issued, a foreign tax identification number and the issuing jurisdiction. A report cannot be completed without a tax identification number, so a newly registering foreign company should apply for its EIN as early as possible and keep a record of the application date in case the 30-day period is tight. The individual layer covers beneficial owners and, for companies first registered in the United States on or after January 1, 2024, company applicants. A beneficial owner under § 1010.380(d) is any individual who directly or indirectly exercises substantial control over the company or owns or controls at least 25 percent of its ownership interests; senior officers are within substantial control regardless of equity. A company applicant is the individual who files the registration document or directs its filing. For each reportable individual the company provides full legal name, date of birth, residential street address, the number and issuing jurisdiction of a non-expired passport or qualifying government identification, and an image of that document, or a FinCEN identifier in place of all of it. The carve-out sits in the new § 1010.380(b)(5). A reporting company is exempt from reporting the BOI of any United States person who is a beneficial owner or company applicant, and U.S. persons are exempt from providing it. "United States person" takes its meaning from § 7701(a)(30) of the Internal Revenue Code, which covers U.S. citizens, resident aliens, and domestic entities. A foreign company with mixed ownership therefore names only its non-U.S. individuals, and one whose 25-percent holders and senior officers are all U.S. persons reports no individuals at all; the interim rule's preamble describes such companies as "exempt from the requirement to report any beneficial owners." Nothing in the rule text, however, turns such a company into a non-reporting company, and FinCEN has not published guidance saying that it may skip the filing altogether. The better reading is that the entity-level information is still due and that the company must still identify its beneficial owners in order to know that none is reportable; a company in that position should confirm the point with counsel rather than assume it has no filing. ## Exemptions That Still Matter for Foreign Companies The 23 original exemptions in § 1010.380(c)(2) survive, and a foreign-formed entity that fits one of them files nothing with FinCEN. The regulated-industry exemptions (securities reporting issuers, banks, insurance companies, SEC-registered investment advisers) are self-evident. Two others require closer attention. The large operating company exemption at § 1010.380(c)(2)(xxi) is the one most foreign commercial enterprises should test first, and the one most often misapplied. All three conditions must be met by the registered entity itself: more than 20 full-time employees in the United States, an operating presence at a physical U.S. office, and a U.S. federal income tax or information return for the previous year showing more than $5,000,000 in gross receipts or sales from U.S. sources. Employees cannot be aggregated across affiliates, so a foreign parent with 200 employees in Europe and eight in New York does not qualify, nor does a company in its first year of U.S. operations, which has no prior-year U.S. return. The subsidiary exemption at § 1010.380(c)(2)(xxii) covers an entity wholly owned or controlled by one or more entities exempt under specified paragraphs. The parent list is not the full exemption list; it includes securities reporting issuers, banks, insurance companies, and large operating companies, but excludes pooled investment vehicles, so a foreign subsidiary of a listed company is typically exempt while a foreign feeder entity under a fund is not. And exemptions must be re-examined over time: a company that stops qualifying must file within 30 calendar days of losing the exemption. ## The 30-Day Clock, Updates, and Penalties The deadline in § 1010.380(a)(1)(i) runs 30 calendar days from the earlier of two events: the date the company receives actual notice that it has been registered to do business, or the date the secretary of state or similar office first provides public notice of the registration, such as by posting it to a publicly accessible registry. In states whose registries post filings promptly, New York among them, the public-notice trigger may control, so the clock should be assumed to start on the filing date rather than on receipt of a certificate. Companies registered before March 26, 2025 had to file by April 25, 2025; one that has not filed is already late and should file now. The obligation is continuing. Under § 1010.380(a)(2), any change to previously reported information, including a change in who qualifies as a beneficial owner or a reported individual's new address or identifying document, requires an updated report within 30 calendar days. A report that was inaccurate when filed must be corrected within 30 calendar days after the company becomes aware of or has reason to know of the error. There is no annual filing; the federal system is event-driven, so the company needs a way of learning about changes among its foreign owners and officers. Penalties are unchanged. Under § 5336(h), a person who willfully provides false BOI or willfully fails to report complete or updated BOI is liable for a civil penalty of up to $500 for each day the violation continues, adjusted annually for inflation, and may be fined up to $10,000, imprisoned for up to two years, or both. Liability can reach the individual who causes the failure and any senior officer at the time, and a safe harbor protects a filer who voluntarily corrects an inaccurate report within 90 days of submitting it. The final rule's preamble confirms that these provisions "continue to apply to foreign reporting companies and foreign persons." ## Foreign LLCs in New York: The State Layer A foreign LLC registered in New York files twice, with different agencies, on different clocks. New York's LLC Transparency Act, at [LLC Law § 1106](https://www.nysenate.gov/legislation/laws/LLC/1106) and [§ 1107](https://www.nysenate.gov/legislation/laws/LLC/1107), defines "reporting company" by reference to 31 U.S.C. § 5336(a)(11) "as amended," limited to LLCs formed or authorized to do business in New York, and defines "exempt company" as an LLC that meets a federal exemption. Because the federal regulation now exempts every domestically formed entity, the Department of State's [published guidance](https://dos.ny.gov/beneficial-ownership-disclosure-frequently-asked-questions) states that only LLCs formed under the law of a foreign country and authorized in New York are subject to the state disclosure requirement, and that U.S.-person beneficial owners are not reported. A bill that would have decoupled the state definitions from the federal ones, [S8432](https://www.nysenate.gov/legislation/bills/2025/S8432), passed both houses in June 2025 and was vetoed on December 19, 2025, so the two regimes remain linked. For a foreign-country LLC, the result is a New York beneficial ownership disclosure (or, if a federal exemption applies, an attestation of exemption) due within 30 days of filing the application for authority, with a $25 fee, followed by an annual statement. Foreign LLCs authorized in New York before January 1, 2026 have until December 31, 2026 under the Department of State's guidance. The state regime reaches only LLCs, requires an annual filing where FinCEN requires none, starts its 30 days from the application filing rather than from notice that registration is effective, and enforces administratively: a "past due" designation after 30 days, Attorney General fines of up to $500 per day, and suspension of the LLC's authority to do business in New York if it ignores a Department of State notice. The firm's [New York LLC Transparency Act service](https://www.newerlaw.com/services/ny-llc-transparency-act.html) prepares that filing alongside the FinCEN report so that one ownership analysis supports both. The Corporate Transparency Act has become a narrow statute with a specific audience. If your company was formed outside the United States and holds, or is about to obtain, a certificate of authority in any state, you are that audience, and the live questions are whether an exemption applies, which of your owners and officers are non-U.S. persons, and whether the 30 days have already started. ## Questions and answers ### Does a foreign company registered to do business in a U.S. state still have to file a BOI report with FinCEN? Yes. Under 31 CFR 1010.380 as amended by FinCEN's August 2026 final rule, an entity formed under the law of a foreign country and registered with a secretary of state or similar office in any U.S. state or tribal jurisdiction is a reporting company. Unless an exemption applies, it must file an initial BOI report within 30 calendar days of notice that its registration is effective and keep the report updated. ### Which owners does a foreign reporting company have to report? Only individuals who are not United States persons. The company reports each non-U.S. individual who exercises substantial control or owns or controls at least 25 percent of its ownership interests and, if first registered on or after January 1, 2024, each non-U.S. company applicant. U.S. citizens, resident aliens, and domestic entities are exempt, but the company's own identifying information is still reported. ### Does the FinCEN filing satisfy the New York LLC Transparency Act? No. A foreign-country LLC authorized to do business in New York must separately file a beneficial ownership disclosure, or an attestation of exemption, with the New York Department of State within 30 days of filing its application for authority, pay a $25 fee, and file an annual statement thereafter. LLCs authorized before January 1, 2026 have until December 31, 2026 under Department of State guidance. This article is for informational purposes only and does not constitute legal advice. Reading this content does not create an attorney-client relationship. Laws and regulations change; readers should not rely on this content as a substitute for qualified legal counsel specific to their circumstances. Attorney Advertising. --- *Attorney Advertising. Prior results do not guarantee a similar outcome. Information provided on this website and through its automated interfaces is general legal information, not legal advice. Viewing this website, contacting the firm, or using any automated interface does not create an attorney-client relationship. No attorney-client relationship exists unless and until a written engagement agreement is signed.* --- # The New York LLC Transparency Act Filing: Who Actually Has to File by December 31, 2026, and What *Cross-Border · November 6, 2026 · David Mitchell, Esq.* > Which New York LLCs must file a BOI disclosure or exemption attestation by December 31, 2026, what each requires, how to file with the DOS, and the penalties. Canonical: https://www.newerlaw.com/posts/new-york-llc-transparency-act-filing-guide.html Author: David Mitchell, Esq. — https://www.newerlaw.com --- ## Key takeaways * Under the Department of State's current guidance, an LLC formed in New York or any other U.S. state or territory files nothing under the LLC Transparency Act, not even an attestation of exemption. * A non-U.S. LLC authorized to do business in New York before January 1, 2026 must file either a beneficial ownership disclosure or a signed attestation of exemption with the Department of State by December 31, 2026, and annually after that. * New York never amended the Act to narrow it; the scope collapsed because the statute borrows FinCEN's definitions, FinCEN narrowed them to foreign-formed companies in 2025, and Governor Hochul vetoed the decoupling bill on December 19, 2025. * Missing the filing means 'past due' status after 30 days, deemed suspension after notice, Attorney General fines of up to $500 per day, and after two years 'delinquent' status with possible dissolution or annulment of authority. If your LLC was formed in New York, or in any other U.S. state or territory, the New York LLC Transparency Act currently requires you to file nothing: the Department of State's published guidance treats every U.S.-formed LLC as outside the law's reporting requirements, with no beneficial ownership report and no attestation of exemption due. If instead your LLC was formed under the law of a foreign country and holds a New York certificate of authority, you must file one of two things with the Department of State by December 31, 2026: a beneficial ownership information (BOI) disclosure identifying your non-U.S. beneficial owners, or, if the company fits one of 23 exemptions, a signed attestation of exemption. Either filing costs $25, is made electronically, and must be renewed annually. That answer surprises people who followed the law when it was enacted, because it was written to cover every LLC in the state. What follows explains how the scope collapsed, which filing applies to you, what each requires, how the Department is accepting them in late 2026, and what happens to companies that miss the date. ## How a law written for every LLC ended up reaching almost none The LLC Transparency Act was enacted as [Chapter 772 of the Laws of 2023](https://www.nysenate.gov/legislation/bills/2023/S995/amendment/B), signed December 22, 2023, and rewritten by a chapter amendment, Chapter 102 of the Laws of 2024, signed March 1, 2024. The amendment pushed the effective date to January 1, 2026, made the beneficial-ownership database confidential rather than public, and added the attestation, annual-statement, and penalty provisions that now sit in [sections 1106](https://www.nysenate.gov/legislation/laws/LLC/1106), [1107](https://www.nysenate.gov/legislation/laws/LLC/1107), and [1108](https://www.nysenate.gov/legislation/laws/LLC/1108) of the Limited Liability Company Law. The drafting choice that matters is in section 1106. New York did not write its own definitions of "reporting company," "beneficial owner," or "exempt company." It borrowed them from the federal Corporate Transparency Act, 31 U.S.C. § 5336, "as amended" and including "any regulations promulgated thereunder." In March 2025 FinCEN issued an interim final rule redefining "reporting company" to mean only entities formed under foreign law and registered to do business in a U.S. state or tribal jurisdiction, and relieving those companies of reporting any U.S. person as a beneficial owner. Because New York's definitions follow the federal regulations wherever they go, the state law narrowed with them. The Legislature saw the problem and passed [S.8432/A.8662-A](https://www.nysenate.gov/legislation/bills/2025/S8432) in June 2025 to replace the cross-references with freestanding state definitions reaching every LLC formed or authorized in New York. Governor Hochul vetoed the bill on December 19, 2025. On August 11, 2026, [FinCEN finalized](https://www.fincen.gov/news/news-releases/fincen-permanently-ends-beneficial-ownership-reporting-requirements-millions) the 2025 rule, making the federal exemption for U.S. companies and U.S. persons permanent. There has been no New York amendment narrowing the Act; the narrowing is entirely the product of the federal rule, the state cross-reference, and the veto. Nothing prevents the Legislature from passing a decoupling bill again, so a U.S.-formed LLC that files nothing this year should revisit the question each session. Date Event December 22, 2023 LLC Transparency Act signed (Chapter 772 of 2023) March 1, 2024 Chapter amendment signed (Chapter 102 of 2024): confidential database, attestation, penalties, 2026 effective date March 2025 FinCEN interim final rule limits federal "reporting company" to foreign-formed entities; U.S. persons need not be reported December 19, 2025 Governor vetoes S.8432, which would have decoupled New York's definitions from the federal rule Late December 2025 Department of State publishes forms, filing instructions, FAQs, and exemption guide January 1, 2026 Act takes effect; LLCs authorized on or after this date file within 30 days of their application for authority August 11, 2026 FinCEN final rule permanently exempts U.S. companies and U.S. persons federally December 31, 2026 Department of State deadline for non-U.S. LLCs authorized in New York before January 1, 2026 Annually thereafter Annual statement confirming or updating the disclosure or attestation (due date not yet announced) ## Which filing applies to you The analysis has three steps. First, where was the LLC formed? If the answer is New York, another state, the District of Columbia, or a U.S. territory, the [Department of State's FAQs](https://dos.ny.gov/beneficial-ownership-disclosure-frequently-asked-questions) say the company is outside the reporting requirements, and the Department describes the attestation only for foreign-country LLCs. Second, if the LLC was formed under the law of a foreign country, does it hold, or is it applying for, a New York certificate of authority? If not, New York has no hook. Third, if it does, does it meet one of the 23 exemption conditions in 31 U.S.C. § 5336(a)(11)(B), which the Department lists on its [exemptions page](https://dos.ny.gov/beneficial-owner-disclosure-exemptions)? These are the federal categories, from securities issuers and banks through tax-exempt entities, subsidiaries of exempt entities, and the "large operating company" with more than 20 full-time U.S. employees, more than $5 million in U.S.-source gross receipts, and a physical U.S. office. Your LLC New York filing Deadline Formed in New York None under current Department of State guidance — Formed in another U.S. state or territory, authorized in New York None under current Department of State guidance — Formed in a foreign country, authorized in New York, no exemption applies Beneficial ownership disclosure (non-U.S. owners and applicants only), then annual statements December 31, 2026 if authorized before January 1, 2026; otherwise 30 days after the application for authority Formed in a foreign country, authorized in New York, exemption applies Attestation of exemption, then annual attestations Same Formed in a foreign country, authorized in New York, all beneficial owners are U.S. persons Unsettled; the Department has not said what it expects Same Two cautions. "Exempt" in that table means a company exempt under the federal list; it does not mean a U.S.-formed company, which the Department treats as simply outside the law rather than as an "exempt company" owing an attestation. The statute's text is less tidy than the guidance: section 1107(b) says every exempt company files an attestation, and section 1106(c) defines an exempt company as one that meets a federal exemption condition, so a U.S.-formed LLC that would qualify for, say, the large operating company exemption has at least a textual argument that an attestation is expected of it. The Department's published position is that no filing is due from U.S.-formed LLCs, and that position is what this article follows; a U.S.-formed LLC that prefers belt and suspenders can ask the Department whether it will accept an attestation. And the last row is a genuine gap: a foreign-country LLC owned entirely by U.S. citizens is a reporting company with nobody to report. One approach, pending guidance, is to file a disclosure that supplies the required applicant information and states that there are no reportable non-U.S. beneficial owners, so that the company is on record as having filed. Whether the Department will accept or expect that is a judgment call until it speaks, and a company in that position should raise the question with counsel well before the deadline. ## What each filing requires A beneficial ownership disclosure under section 1107(a) identifies each beneficial owner and each applicant by full legal name, date of birth, current home or business street address, and the number from an unexpired passport, state driver's license, or other government-issued identification document; the Department's form also asks for the document type, issuing jurisdiction, and expiration date. A beneficial owner is an individual who exercises substantial control over the company or owns or controls 25 percent or more of its ownership interests; trusts and entities are looked through to the individuals behind them. An applicant is the person who filed, or primarily directed the filing of, the application for authority. In both cases only non-U.S. individuals are reported, and the Department's form asks for each individual's underlying details rather than a FinCEN identifier. A member, manager, or other authorized person signs the certification, prints their name, and states the capacity in which they sign. An attestation of exemption under section 1107(b) is shorter but is not a checkbox. The statute requires an electronic attestation made under penalty of perjury that identifies the specific exemption claimed and the facts supporting it. The Department's form asks for the company's name and any fictitious name used in New York, its jurisdiction of organization, the date its application for authority was filed, the exemption relied on, and the supporting facts, with the same signature block as the disclosure. Treat the supporting-facts field as a short written record of why the exemption holds: for a large operating company, the headcount, the gross-receipts figure, and the U.S. office address. Section 1108(c) makes it unlawful to knowingly submit false or fraudulent information, with a safe harbor for voluntary corrections within 90 days. Both categories then owe an annual statement under section 1107(g) confirming or updating the beneficial ownership information, the street address of the principal executive office, and exempt status if applicable. The Department has not yet announced the annual due date. An exempt company whose exemption lapses must file a full disclosure, and a reporting company that discovers an error may file a corrected report. ## How to file with the Department of State in late 2026 Section 1107(c) requires every disclosure, attestation, and fee to be submitted electronically. As of this writing the online submission portal is still marked "coming soon" on the Department's [Beneficial Owner Disclosure page](https://dos.ny.gov/beneficial-owner-disclosure), and the operative channel is email: the completed Initial Beneficial Ownership Disclosure Report or Initial Attestation of Exemption form is sent, with a credit or debit card authorization for the $25 non-refundable fee, to the address published in the Department's [filing instructions](https://dos.ny.gov/beneficial-ownership-disclosure-filing-instructions). The Department will not accept these filings by mail or fax because of the personal information they contain. The Department returns a receipt or rejection notice by email. Anyone the company authorizes may submit the filing, but that person certifies that the contents are true, correct, and complete. What the Department does with the information is governed by section 1107(f) as rewritten in 2024. Beneficial owner information is held in a secure database, is confidential, and is exempt from the Freedom of Information Law. It may be disclosed only with the owner's written consent, under a court order, to government agencies performing official duties, or for valid law enforcement purposes, and a recipient generally may not redisclose it. That is a meaningful change from the 2023 version of the law, which would have published beneficial owners' names in a searchable public database. ## What happens if you miss it Section 1108 builds a three-stage escalation. A company that fails to file its disclosure, attestation, or annual statement for more than 30 days is marked "past due" on the Department's records. A company that fails to file for more than two years is marked "delinquent." At either stage the Attorney General may assess a fine of up to $500 for each day the company has been past due or delinquent, and clearing the status requires filing the overdue statement, paying a $250 fine to the Department, and obtaining the Attorney General's confirmation that any penalties have been paid. Separately, under section 1108(g), a company that has not filed its disclosure or attestation is deemed suspended after at least 30 days' notice, and a suspended company may not conduct business in New York until it files. The suspension is annulled retroactively on filing and does not invalidate the company's contracts or expose members or managers to personal liability. The outer limit is section 1108(e). For a delinquent company, or one that knowingly filed false information, the Attorney General may bring an action to dissolve a New York LLC or annul a foreign LLC's authority to do business. There is no criminal penalty in the Act for a simple failure to file; the exposure is civil, but the daily fine accrues against a cliff deadline, and "suspended" status is visible to lenders, counterparties, and anyone running a Department of State search. ## The federal overlap, and what to watch A foreign-country LLC authorized in New York now has two separate beneficial ownership filings, and satisfying one does not satisfy the other. Federally, FinCEN's August 2026 final rule keeps the Corporate Transparency Act in force for entities formed under foreign law that have registered to do business in a U.S. state, which must file a BOI report with FinCEN within 30 days after their registration becomes effective, reporting only non-U.S. beneficial owners. The firm handles that filing alongside the state registration as a [fixed-scope federal CTA engagement](https://www.newerlaw.com/services/federal-cta-foreign-entities.html). The New York filing goes to a different agency, on a different form, with its own fee and an annual renewal the federal regime does not have; the one piece of good news is that the identity documents gathered for the FinCEN report can be reused for the New York disclosure. Three things could change the picture: the Legislature could re-pass a decoupling bill and the Governor could sign it, bringing every New York LLC back inside the Act; FinCEN could revise its rule again, and New York's definitions would move with it; and the Department could open the portal and set the annual statement date. For now the practical advice is simple. If your LLC was formed anywhere in the United States, confirm that conclusion against the Department's current FAQs and calendar an annual check; on current guidance no filing is due. If it was formed abroad and holds New York authority, decide between the disclosure and the attestation now, collect the identity documents, and file before December 31. The firm offers this as a [fixed-scope New York LLC Transparency Act filing](https://www.newerlaw.com/services/ny-llc-transparency-act.html): determination of which filing applies, collection of the owner information, preparation and submission, and the annual follow-up. ## Questions and answers ### Does my New York-formed LLC have to file anything under the LLC Transparency Act by the end of 2026? Not under current Department of State guidance. Because the Act borrows FinCEN's definition of 'reporting company,' and FinCEN limited that term to foreign-formed entities in 2025, the Department's FAQs treat LLCs formed in New York or any other U.S. state or territory as outside the reporting requirements, with no disclosure and no attestation due. That could change if the Legislature re-passes a decoupling bill, so confirm annually. ### What is the difference between the beneficial ownership disclosure and the attestation of exemption? The disclosure identifies each non-U.S. beneficial owner and applicant by legal name, date of birth, address, and an unexpired government ID number. The attestation, filed by a foreign-country LLC that meets one of 23 federal exemptions, names the exemption claimed and states the supporting facts under penalty of perjury. Both are signed by a member, manager, or authorized person, cost $25, and are renewed annually. ### How do I actually file with the New York Department of State, and is the portal live? As of November 2026 the Department's online portal is still marked 'coming soon.' Filings are made by emailing the Department's PDF form, together with a credit or debit card authorization for the $25 fee, to the address in its filing instructions. Mail and fax are refused because the forms contain personal information. The Department returns a receipt or rejection notice by email. This article is for informational purposes only and does not constitute legal advice. Reading this content does not create an attorney-client relationship. Laws and regulations change; readers should not rely on this content as a substitute for qualified legal counsel specific to their circumstances. Attorney Advertising. --- *Attorney Advertising. Prior results do not guarantee a similar outcome. Information provided on this website and through its automated interfaces is general legal information, not legal advice. Viewing this website, contacting the firm, or using any automated interface does not create an attorney-client relationship. No attorney-client relationship exists unless and until a written engagement agreement is signed.* --- # Mukherji v. Miller: A Federal Court Strikes the EB-1A "Final Merits Determination" *Immigration · Federal Litigation · June 26, 2026 · David Mitchell, Esq.* > A Nebraska district court relied on Loper Bright to set aside USCIS's two-step EB-1A "final merits determination," vacated the denial, and ordered approval. What the decision held, why Loper Bright is what changed, and what it means for pending petitions. Canonical: https://www.newerlaw.com/posts/loper-bright-eb1-final-merits.html Author: David Mitchell, Esq. — https://www.newerlaw.com --- ## Key takeaways * On January 28, 2026, the District of Nebraska in Mukherji v. Miller vacated an EB-1A denial based on the final merits determination and ordered USCIS to approve the petition. * The court held the final merits framework was a substantive rule adopted without notice-and-comment, was arbitrary and capricious, and warranted no deference after Loper Bright. * Mukherji binds neither USCIS nationwide nor any appellate court, so service centers will keep applying the final merits determination and petitions should be prepared accordingly. * An EB-1A denial that credits three or more criteria but fails on a totality assessment is now a substantially stronger candidate for federal court review than before. For more than a decade, EB-1A extraordinary-ability petitioners have lived under a two-tier adjudication regime that exists nowhere in the Immigration and Nationality Act and nowhere in the regulations. A petitioner first had to satisfy at least three of the ten evidentiary criteria set out in 8 C.F.R. § 204.5(h)(3). Then, having done so, the petitioner had to survive a second, free-floating evaluation that USCIS called the “final merits determination” — an undefined judgment about whether the documentary record, taken as a whole, was sufficient to show extraordinary ability. The second step was where most denials lived. It had no fixed contours, no published standard, and no meaningful framework for review. On January 28, 2026, the United States District Court for the District of Nebraska, in *Mukherji v. Miller*, vacated a denial built on that second step and instructed USCIS to approve the petition. The court relied on *Loper Bright Enterprises v. Raimondo*, decided by the Supreme Court in 2024, to conclude that the final merits determination is not entitled to deference and cannot stand. The decision is narrow on its face. Its implications for EB-1A practice are not. ## Background: How the “Final Merits Determination” Was Built The framework traces to the Ninth Circuit’s 2010 decision in *Kazarian v. USCIS*. *Kazarian* rejected a particular USCIS practice — the agency’s habit of refusing to credit evidence under a regulatory criterion unless the underlying achievement was itself shown to be “extraordinary.” That approach collapsed proof into the ultimate question and made the criteria functionally unwinnable. The court untangled the two: the criteria are a threshold; the ultimate finding of extraordinary ability is a separate inquiry. USCIS read *Kazarian* as authority to build a formal two-step process and adopted it as nationwide policy in December 2020 through revisions to its Policy Manual. Step one: count the criteria. Step two: assess the totality. Adjudicators were instructed to ask, after a petitioner cleared step one, whether the evidence “in its totality” demonstrated the requisite high level of expertise — an inquiry the Policy Manual described but never reduced to articulable standards. The result was predictable. Petitioners would satisfy four, five, or six of the ten criteria and receive a denial reciting that the evidence, viewed in its totality, did not establish sustained acclaim at the top of the field. The denial would rarely identify which specific deficiency drove the result. The second step became a discretionary safety valve that operated outside the regulations and outside the reach of meaningful review. ## The Decision The petitioner in *Mukherji* was an Indian national journalist who filed an I-140 in March 2024 seeking EB-1A classification. USCIS conceded that she satisfied five of the ten regulatory criteria — nearly double the regulatory minimum — but denied at the final merits stage, concluding that the totality of the record did not establish that she sat “at the very top” of her field on a sustained basis. The district court vacated the denial and remanded with instructions to approve. Three holdings carry the decision. **First**, the court rejected the final merits framework as a substantive rule adopted without the notice-and-comment process required by 5 U.S.C. § 553. USCIS had treated the framework as a binding adjudicative standard but had never subjected it to rulemaking. That alone was disqualifying. **Second**, the court held the framework arbitrary and capricious under *Encino Motorcars LLC v. Navarro*. An agency that departs from a prior approach owes the public a reasoned explanation acknowledging the change. The 2020 Policy Manual revisions did not do so. USCIS did not concede it was raising the bar; it simply did, and then declined to define how high. **Third**, and most consequential going forward, the court invoked *Loper Bright* to assert independent judgment on the legal question. Whether USCIS may impose a totality assessment beyond the regulatory criteria is a question of statutory and regulatory interpretation. Under *Loper Bright*, that question belongs to the court, not to the agency. The court concluded that neither INA § 203(b)(1)(A) nor the implementing regulations contemplate a second evaluative layer. The criteria are the criteria. Satisfying them establishes eligibility. The shift is not that USCIS lost a single petition. It is that the legal architecture supporting the final merits determination — deference to the agency’s interpretation of its own framework — no longer exists. After *Loper Bright*, every reviewing court starts from a clean slate. ## Why Loper Bright Changes the Math Before June 2024, *Chevron* gave agencies meaningful latitude to construe ambiguous statutory terms. “Extraordinary ability” is the paradigmatic ambiguous term, and USCIS had used that ambiguity to defend a two-step framework that the statute did not require. The Fifth Circuit’s 2022 decision in *Amin v. Mayorkas*, which upheld the final merits determination as a permissible interpretive rule, rested squarely on that deference. *Loper Bright* removed it. Reviewing courts must now decide for themselves whether an agency’s reading of a statute is the best reading — not merely a permissible one. Where USCIS once needed only to articulate a defensible construction, it now needs a construction the court would adopt independently. That is a significantly harder standard, and one the final merits determination cannot easily satisfy. The framework was built on agency assertion. It now requires a textual home, and it does not have one. The Nebraska district court is one trial court. Its decision does not bind USCIS nationwide and does not bind any court of appeals. But it is the first post–*Loper Bright* opinion to take the question head-on, and the reasoning travels. Other district courts evaluating similar denials will read *Mukherji*, and many will reach the same place. ## A Caveat on Pace None of this happens quickly, and it is important to be clear about what does not change in the near term. **USCIS will not stop applying the final merits determination.** A single trial-court order in one district does not bind the agency nationwide. Adjudicators at the Nebraska, Texas, California, and Vermont service centers will continue to issue denials under the existing framework, working from the same Policy Manual and the same template language they used the day before *Mukherji* was decided. There is no indication that training has changed, that templates have been revised, or that the Policy Manual will be updated. Petitions filed this week should be prepared as if the framework is still fully in force, because for adjudication purposes it is. The realistic timeline for any operational change is measured in years, not months. Other district courts will reach the same question and will not all reach the same answer. Circuit splits will develop. The Eighth Circuit may take *Mukherji* on review and either ratify it or pull it back. Other circuits will weigh in on similar challenges. *Amin* remains good law in the Fifth Circuit until either that court revisits it under *Loper Bright* or the Supreme Court resolves the split. A nationwide change in adjudication practice — whether through formal policy reversal, rulemaking, or appellate consensus — is plausible but not imminent. The practical value of *Mukherji* in the interim is asymmetric. It does not stop denials from issuing. It changes what a petitioner can do about one once received, and it strengthens the posture on motions to reopen and at the federal-court threshold. Treat the decision as a meaningful shift in the litigation landscape, not as an immediate change in administrative practice. ## What This Means for Petitioners and Petitions in Process ### Pending Denials and Reopened Cases A denial that rests primarily on a final merits determination — rather than on a failure to satisfy three regulatory criteria — is now a substantially stronger candidate for federal court review. The traditional cost-benefit calculation that favored refiling over litigation has shifted. Petitioners and counsel evaluating a recent denial should look closely at the denial’s reasoning. If the criteria were credited and the denial turned on a totality assessment, the litigation posture has materially improved. ### Filing Strategy The decision should not encourage petitioners to file thinner records. USCIS will not abandon the final merits framework absent a binding appellate decision or a policy reversal, and the criteria themselves remain the gating evaluation. Petitions that cleanly establish four, five, or more criteria with high-quality documentary support remain the strongest filings. What has changed is the meaning of a denial after that quality of record — not the standard for building it. ### Government Response USCIS has options. The agency can attempt notice-and-comment rulemaking to codify a totality assessment with articulable standards — a meaningful undertaking that would invite further litigation on the substantive merits of the rule. It can press the issue to the Eighth Circuit and seek to confine *Mukherji*. It can adjust adjudication practice quietly and continue to deny on criteria-based grounds rather than totality grounds. The likely response is some combination of the second and third, with rulemaking unlikely in the near term. ## A Broader Pattern *Mukherji* is part of a broader recalibration in administrative law that is touching every corner of immigration adjudication. *Loper Bright* did not invalidate any specific agency practice. What it did was return the interpretive question to courts, and that change is now working through individual cases. The EB-1A final merits determination is one of the first sustained agency practices to fall. It will not be the last. For founders, executives, and researchers considering an EB-1A filing, the takeaway is narrower than the headlines suggest. The substantive standard — extraordinary ability evidenced through the regulatory criteria — has not changed. USCIS adjudication has not changed either, and is unlikely to in the short term. What has changed is the post-denial landscape. A well-documented petition that nonetheless receives a final-merits denial is no longer the dead end it once appeared to be, and the cost-benefit calculation for federal court review is meaningfully different than it was a year ago. ## Questions and answers ### What is the EB-1A final merits determination and is it still valid? The final merits determination is USCIS's second step in EB-1A adjudication: after a petitioner satisfies at least three of the ten criteria in 8 C.F.R. 204.5(h)(3), the agency separately judges whether the record as a whole shows extraordinary ability. It appears nowhere in the statute or regulations and was adopted as nationwide policy in December 2020. In Mukherji v. Miller, a Nebraska federal court held it cannot stand, but USCIS continues to apply it. ### Did Loper Bright end the EB-1A final merits determination? Not yet in practice. Loper Bright removed the Chevron deference that let USCIS defend the two-step framework and that underpinned the Fifth Circuit's 2022 decision in Amin v. Mayorkas. Courts must now decide the best reading of the statute themselves, and the Nebraska district court in Mukherji found no textual basis for a second evaluative layer. But one trial court order does not bind USCIS nationwide, and Amin remains good law in the Fifth Circuit. ### My EB-1A was denied on final merits even though I met several criteria. Should I refile or sue? Federal court review is now a much stronger option. If USCIS credited three or more regulatory criteria and denied only on a totality assessment, Mukherji v. Miller materially improves the litigation posture and strengthens motions to reopen, shifting the traditional calculation that favored refiling. The decision does not justify thinner filings, though: USCIS still applies the framework, so new petitions should cleanly establish four, five, or more criteria with strong documentary support. This article is for informational purposes only and does not constitute legal advice. Reading this content does not create an attorney-client relationship. Laws and regulations change; readers should not rely on this content as a substitute for qualified legal counsel specific to their circumstances. Attorney Advertising. --- *Attorney Advertising. Prior results do not guarantee a similar outcome. Information provided on this website and through its automated interfaces is general legal information, not legal advice. Viewing this website, contacting the firm, or using any automated interface does not create an attorney-client relationship. No attorney-client relationship exists unless and until a written engagement agreement is signed.* --- # New York's QSBS Decoupling Proposal: What Founders Need to Know *Tax · Venture Capital · March 20, 2026 · David Mitchell, Esq.* > New York has proposed retroactively decoupling from the federal Section 1202 Qualified Small Business Stock exclusion. What the proposal would do, who is exposed, and what founders and investors should consider now. Canonical: https://www.newerlaw.com/posts/new-york-qsbs-decoupling.html Author: David Mitchell, Esq. — https://www.newerlaw.com --- ## Key takeaways * New York's State Senate one-house budget for fiscal 2026-2027 would decouple state income tax from the federal Section 1202 QSBS exclusion, retroactive to January 1, 2025. * A New York City founder with $10 million of QSBS gain would owe roughly $1.48 million in state and city tax under the proposal, versus zero today. * QSBS gain is sourced to the seller's state of residence, so a founder who is not a New York resident at sale owes no New York tax on it. * A fifteen-month retroactive reach sits at the outer boundary of what courts have tolerated under United States v. Carlton, leaving a Due Process challenge an open question. For more than three decades, Section 1202 of the Internal Revenue Code has offered one of the most significant tax benefits available to startup founders and early-stage investors: a complete exclusion from federal income tax on gains from the sale of Qualified Small Business Stock held for at least five years. For stock acquired after September 27, 2010, the exclusion is 100% of the gain, with a per-issuer cap of the greater of $10 million or ten times the taxpayer's adjusted basis. The provision was enacted to incentivize capital formation in small businesses, and it has become a central feature of startup exit planning. New York has, until now, conformed to Section 1202. If your QSBS gain was excluded federally, it was excluded at the state level too. That conformity is now under direct threat. ## The Proposal New York's State Senate has incorporated into its one-house budget proposal for fiscal year 2026–2027 a provision that would decouple New York personal income tax from the federal QSBS exclusion under Section 1202. If enacted, taxpayers who exclude QSBS gains from federal adjusted gross income would be required to add those gains back when computing New York taxable income. The state-level benefit would be eliminated entirely. The effective date is retroactive to January 1, 2025. This is not a prospective change. Founders who sold QSBS in calendar year 2025 and filed New York returns relying on the exclusion would face a recomputation of their state tax liability. The retroactive effective date is the most aggressive feature of the proposal. Taxpayers who structured exits and made residency decisions in 2025 based on the existing law would find the ground shifted beneath them after the fact. The proposal was advanced in the State Senate's budget resolution. Whether the Assembly or the Governor will adopt it remains uncertain. Final budget negotiations are expected before the April 1, 2026 statutory deadline. The provision may survive intact, be modified, or be dropped entirely during negotiations. ## Why This Matters for Founders The math is straightforward and the numbers are large. New York's top marginal income tax rate is 10.9%. New York City adds an additional 3.876%. A founder residing in New York City who sells QSBS with $10 million in gain currently pays zero federal tax and zero state tax on that gain. Under the proposed decoupling, the same founder would owe approximately $1.48 million in combined state and city tax on income that remains fully excluded federally. For larger exits, the exposure scales proportionally. A $50 million gain — not unusual in a successful Series B or later exit — would generate roughly $7.4 million in New York state and city tax liability that does not exist under current law. This is not a marginal adjustment. It is a material change to the after-tax economics of building a company in New York. The policy also creates asymmetric incentives. The federal QSBS exclusion was designed to encourage investment in domestic small businesses. New York's decoupling would tell founders that the federal government will reward them for building a qualifying small business, but New York will not. The natural consequence is that founders with imminent liquidity events — and the flexibility to relocate — will consider doing so. ## The Retroactivity Problem Retroactive tax legislation is not unconmon, and courts have generally upheld it where the retroactive period is modest and the legislative purpose is legitimate. But retroactivity in this context raises distinct concerns. A founder who sold QSBS in March 2025, filed a New York return excluding the gain in conformity with then-existing law, and made financial commitments based on the after-tax proceeds would now face an unexpected state tax bill that could be seven figures. The transaction is closed. The proceeds may be deployed. The reliance on existing law was reasonable and, at the time, legally correct. Whether retroactive application of this provision would survive a constitutional challenge under the Due Process Clause is an open question. The Supreme Court's framework, established in *United States v. Carlton* (1994), requires a rational legislative purpose and a "modest" period of retroactivity. A retroactive reach of fifteen months — from January 2025 to an enactment date in spring 2026 — is at the outer boundary of what courts have historically tolerated at the federal level. New York courts applying the state constitution's due process protections may evaluate the question differently. ## Planning Considerations ### Residency and Domicile New York taxes residents on worldwide income. It taxes nonresidents only on income sourced to New York. QSBS gain is generally sourced to the taxpayer's state of residence, not to the state where the issuing company is located. A founder who is not a New York resident at the time of sale would not owe New York tax on QSBS gain, regardless of whether the company was formed or headquartered in New York. This makes residency planning the most direct response to the proposal. But it must be done carefully. New York's Department of Taxation and Finance conducts aggressive residency audits, particularly for high-income individuals who change domicile around a liquidity event. A change of domicile requires more than filing a declaration — it requires a genuine, permanent relocation supported by objective factors: sale or lease termination of the New York residence, driver's license change, voter registration, relocation of personal effects, and primary presence in the new state. Partial moves and maintained ties to New York invite audit challenges that can take years to resolve. ### Trust Planning New York's tax code provides that certain trusts — commonly referred to as exempt resident trusts — are not subject to New York income tax on gains from intangible property, provided specific conditions are met. The trust must have no New York trustees, hold no New York real property, and have no New York-source income. A founder who transfers QSBS to a properly structured exempt resident trust before a sale could potentially shield the gain from the proposed add-back, because the gain would be realized by the trust rather than by the individual. This strategy requires advance planning and careful execution. The transfer must precede the sale. The trust must satisfy all statutory requirements at the time the gain is realized. The IRS's rules on incomplete gift trusts and grantor trust status add additional complexity. This is not a last-minute solution. ### Timing Founders with pending exits should monitor the budget negotiation process closely. If the provision appears likely to be enacted, the retroactive effective date means that waiting provides no benefit — the exposure already exists for 2025 transactions. The planning window is now, not after enactment. ## The Broader Signal New York is not the first state to consider decoupling from Section 1202. California has never conformed to the federal QSBS exclusion and taxes these gains at ordinary income rates. Massachusetts, New Jersey, and Pennsylvania each have their own approaches, ranging from partial conformity to full taxation. But New York's proposal is notable for its retroactive reach and for the signal it sends at a moment when the state is competing with Florida, Texas, and other no-income-tax jurisdictions for startup talent and capital. The federal QSBS exclusion exists because Congress concluded that preferential tax treatment for small business equity encourages risk-taking and job creation. Whether one agrees with that policy judgment or not, New York's decision to decouple from it is a choice to impose a cost on exactly the economic activity the federal provision was designed to encourage. Founders evaluating where to build their next company will notice. The budget negotiations are ongoing. The provision may be adopted, modified, or abandoned. We will update this analysis as the situation develops. ## Questions and answers ### Is New York getting rid of the QSBS tax exclusion? It is proposed but not enacted. The New York State Senate's one-house budget for fiscal year 2026-2027 includes a provision that would require taxpayers to add back federally excluded Section 1202 QSBS gain when computing New York taxable income, eliminating the state benefit entirely. The Assembly and Governor have not adopted it, and final budget negotiations are expected before the April 1, 2026 deadline. The provision could survive, be modified, or be dropped. ### How much New York tax would I owe on QSBS gain if the decoupling passes? Up to 10.9% state tax plus 3.876% New York City tax on gain that stays fully excluded federally. A New York City resident selling QSBS with $10 million of gain, who currently pays zero federal and zero state tax, would owe approximately $1.48 million in combined state and city tax. A $50 million gain would generate roughly $7.4 million in New York liability that does not exist under current law. ### Can I avoid New York tax on QSBS by moving before I sell? Yes, if the move is genuine. New York taxes nonresidents only on New York-source income, and QSBS gain is sourced to the seller's state of residence, not where the company is located. New York's Department of Taxation and Finance aggressively audits domicile changes around liquidity events. A valid change requires selling or ending the lease on the New York home, changing driver's license and voter registration, moving personal effects, and primary presence in the new state. This article is for informational purposes only and does not constitute legal advice. Reading this content does not create an attorney-client relationship. Laws and regulations change; readers should not rely on this content as a substitute for qualified legal counsel specific to their circumstances. Attorney Advertising. --- *Attorney Advertising. Prior results do not guarantee a similar outcome. Information provided on this website and through its automated interfaces is general legal information, not legal advice. Viewing this website, contacting the firm, or using any automated interface does not create an attorney-client relationship. No attorney-client relationship exists unless and until a written engagement agreement is signed.* --- # AI Agents with Crypto Wallets: The Liability Gap Nobody Has Closed *AI · Regulatory · February 26, 2026 · David Mitchell, Esq.* > Autonomous AI agents now hold and transact from crypto wallets. The technology is live, but the legal accountability framework for an agent with no human behind it is not. An analysis of the liability gap and how it might be closed. Canonical: https://www.newerlaw.com/posts/ai-agents-crypto-wallets-legal-frontier.html Author: David Mitchell, Esq. — https://www.newerlaw.com --- ## Key takeaways * Current U.S. law attributes an AI agent's actions to the human or entity that deploys it, but that principle presupposes an identifiable accountability chain that autonomous agents increasingly lack. * No bill moving through Congress directly addresses AI agents as economic actors; the GENIUS Act and CLARITY Act regulate stablecoins and digital assets, not the agents using them. * Neither the GENIUS Act nor the CLARITY Act addresses legal personhood for agents, liability attribution, KYC/AML for non-human wallets, or tax treatment of agent-earned income. * Foreign operators of agents earning U.S.-source income face unresolved questions on effectively connected income, FIRPTA exposure, and treaty beneficial-owner status, and should analyze obligations now. Avichal Garg of Electric Capital put the problem plainly last week: "What happens if there's not a human behind it at all? It's some piece of code that owns a wallet, executing code to make more money. How does liability work in that case?" He compared the moment to the invention of the limited liability corporation in the 19th century — a legal structure that unlocked pooled capital and industrial-scale growth precisely because it reordered how accountability was assigned. The comparison is apt, but it cuts in a direction Garg may not have intended. The LLC didn't emerge because technology outpaced law. It emerged because legislators made a deliberate choice to extend legal personhood to a new kind of entity, define its boundaries, and prescribe who bears responsibility when it acts. We did the work. Right now, with autonomous AI agents holding and transacting crypto at scale, no one has done that work. The technology is live. The accountability framework isn't. ## What an AI Agent with a Wallet Actually Does The technical picture is straightforward. A developer deploys an autonomous agent — software capable of making decisions and executing actions without real-time human instruction. That agent is given access to a non-custodial crypto wallet. The wallet holds assets. The agent can receive payments, pay for services, execute trades, enter on-chain agreements, and hire other agents, all autonomously and all without a human approving each transaction. Blockchains make this possible in ways that traditional financial infrastructure does not. Settlement is instant and global. There are no business hours, no correspondent banking relationships, no KYC gates on the receiving end of a transaction. An agent in a data center can pay an agent running in a different jurisdiction in milliseconds, with finality. This is not speculative. Agent-to-agent payments, autonomous trading bots, and AI systems that manage on-chain positions are already operating. The question is not whether this happens. The question is what legal framework governs it when something goes wrong — or when regulators decide it needs to be governed at all. ## The Liability Vacuum Current law attributes the actions of software to the humans or entities that deploy it. An AI agent is a tool; its developer, operator, or deployer holds the legal bag. That principle is well-established in contract law, tort, and securities regulation. The complication is that it presupposes a clear chain of human accountability, and that chain is increasingly difficult to identify. Consider a few scenarios that existing frameworks handle poorly: **The orphaned agent.** A developer builds and deploys an autonomous trading agent, then abandons the project. The agent continues running. It transacts. It accumulates assets. It eventually suffers a loss or causes one. The developer is no longer maintaining the system. There may be no corporate entity that continues to employ them. Who is liable? Under current law, probably the developer — but collecting against an individual who has moved on, and whose liability was never clearly scoped by contract, is a different matter than the liability existing in principle. **The multi-agent chain.** Agent A, deployed by Company X, hires Agent B, deployed by Company Y, to perform a service. Agent B makes a decision that causes a loss to a third party. Was Agent B acting as an independent contractor? An agent of Agent A? A subagent of Company X? The existing law of agency — which turns on concepts of control, direction, and consent — was not designed to answer these questions when neither principal is a human being exercising real-time judgment. **The foreign operator.** A developer based outside the United States deploys an agent that transacts with U.S. persons, holds assets, and earns income. No U.S. entity is in the picture. The agent's activity would trigger U.S. tax and regulatory obligations if a human or domestic company were doing it. Whether those obligations attach to autonomous software with a foreign operator is unresolved — and the answer matters enormously for the clients designing these systems now. "You can't punish an AI. You can turn them off, but they don't care." — Avichal Garg, Electric Capital. This is the enforcement problem in a sentence. Deterrence requires that the deterred party have something to lose. Liability frameworks that reach only the deployer are workable if deployers are identifiable, solvent, and subject to U.S. jurisdiction. When they aren't, the framework has no grip. ## What Legislation Is Actually in Motion The honest answer is that no bill currently moving through Congress directly addresses AI agents as economic actors. What exists is a set of digital asset laws that will become the substrate on which agent-specific rules eventually get built — and that substrate has significant gaps. ### The GENIUS Act (Signed July 2025) The Guiding and Establishing National Innovation for U.S. Stablecoins Act established the first federal regulatory framework for payment stablecoins. It designates the OCC as principal administrator, with the Federal Reserve, FDIC, and Treasury in supporting roles. Importantly, it clarifies that approved stablecoins are neither securities nor deposits — a classification question that had been paralyzing stablecoin issuers for years. For AI agents, the GENIUS Act matters because stablecoins are the most practical medium for agent-to-agent payments. An agent transacting in USDC or a similar instrument is operating in a newly regulated payment layer. Whether the agent itself — as opposed to its operator — qualifies as a "payment stablecoin issuer" or triggers other obligations under the Act is not addressed. The implementing regulations, due by July 2026, will be the first opportunity for regulators to say something useful here. ### The CLARITY Act (Passed House, July 2025) The Digital Asset Market Clarity Act passed the House 294–134 and represents the most comprehensive attempt to date to define the regulatory perimeter around digital assets. It draws a clear line between SEC and CFTC jurisdiction — resolving a years-long turf war that left the industry operating under uncertainty — and creates a tailored disclosure framework for digital asset projects raising capital. The CLARITY Act also addresses "digital asset brokers, dealers, and exchanges." Whether an autonomous agent that executes trades on behalf of itself — or on behalf of its operator — constitutes a broker or dealer under the Act is an open question. The bill's definitions were drafted with human-operated entities in mind. An agent that intermediates transactions between other agents may fall within the definitions or outside them depending on interpretive choices that haven't been made yet. ### What Isn't There Neither the GENIUS Act nor the CLARITY Act addresses: * Legal personhood or capacity for autonomous agents * Attribution of liability when an agent acts without real-time human direction * KYC/AML obligations for wallets operated by non-human entities * Tax treatment of income earned or losses incurred by an autonomous agent * Cross-border jurisdiction when an agent operates across multiple countries simultaneously * Fiduciary duties, if any, owed by an agent to the humans whose assets it manages The EU's AI Act, which began applying to high-risk systems in August 2024, imposes conformity assessments and transparency requirements on AI systems deployed in regulated sectors — but it does not create a legal personhood framework for agents, and its provisions on autonomous financial activity are limited. MiCA, the EU's comprehensive crypto markets regulation fully in effect since December 2024, similarly addresses the instruments agents might use but not the agents themselves. ## The Cross-Border Dimension This is where the gap becomes most acute for the clients I work with. Foreign businesses and investors deploying autonomous agents that touch U.S. assets or U.S. persons face a set of obligations that the current framework applies unevenly and inconsistently. If a foreign person deploys an agent that earns U.S.-source income — say, through on-chain lending to U.S. counterparties, or through fees earned from U.S. users — the question of whether withholding tax applies turns on whether that income is "effectively connected" with a U.S. trade or business. The analysis was developed for human enterprises with offices and employees. Applying it to software running in a cloud environment with no fixed place of business requires extrapolation that the IRS has not yet formally made. FIRPTA creates a separate layer. If an autonomous agent, in the course of its operations, acquires an interest in U.S. real property — directly or through a fund structure — the foreign operator may have FIRPTA exposure that the agent cannot self-report or withhold. The agent has no legal identity. The operator may not know the acquisition occurred until after the fact. U.S. tax treaties generally reduce or eliminate withholding on certain categories of income for qualifying residents of treaty partner countries. Whether an AI agent's operator can claim treaty benefits on income the agent earns is an open question. The treaty analysis turns on who the "beneficial owner" of the income is — a concept designed for human taxpayers and corporate entities, not autonomous software. ## What Founders and Operators Should Be Doing Now The law will eventually catch up. It always does. The question is what structures are in place when it does, and whether those structures will be seen as good-faith attempts at compliance or as deliberate gaps. A few practical considerations for those building or deploying AI agents with financial capabilities today: **Entity structure matters more, not less.** If an agent is going to hold assets, execute transactions, or earn income, the entity that deploys it should be deliberately structured to handle those flows. That means thinking about where the operating entity is domiciled, how profits and losses are reported, and what happens to assets the agent accumulates. The choice of entity affects tax treatment, liability exposure, and regulatory classification in ways that are difficult to unwind after the fact. **Operator accountability chains need to be explicit.** The contractual agreements governing agent deployment should clearly attribute responsibility for the agent's actions to a specific legal person. When regulators eventually look at agent operators, they will want a clean chain of accountability. Agreements that leave this ambiguous create exposure for everyone in the chain. **Cross-border operators face the most uncertainty.** Foreign persons or businesses deploying agents that interact with U.S. markets, U.S. assets, or U.S. persons should be conducting a current analysis of their U.S. tax and regulatory obligations — not waiting for the framework to clarify. The analysis is imperfect because the rules are imperfect, but the alternative is discovering a material obligation retroactively. **Watch the implementing regulations.** The GENIUS Act's implementing rules are due by July 2026. The CLARITY Act, if it moves through the Senate and is signed, will generate a rulemaking process that is the best near-term opportunity for regulators to address agent-specific questions. The comment periods on those rulemakings are the moment when operators can — and should — engage. Garg is right that this is a foundational moment. The invention of the LLC didn't just create a new liability shield — it created a new unit of economic organization that structured how capital, risk, and accountability were allocated for the next century. Something analogous is needed for autonomous agents. The difference is that the LLC emerged from deliberate legislative design. What we have now is autonomous financial actors operating in a legal framework that wasn't built for them, transacting at a scale and speed that the law hasn't caught up to, and accumulating real economic exposure in the gaps. That's not a reason to stop building. It is a reason to build carefully, structure deliberately, and stay close to the regulatory process as it develops. ## Questions and answers ### Who is liable when an autonomous AI agent with a crypto wallet causes a loss? Under current law, the developer, operator, or deployer of the agent is liable, because software is treated as a tool of the person who deploys it. That rule works poorly when the developer has abandoned the project, when agents hire other agents across companies, or when the operator is outside the United States, because liability may exist in principle but be impossible to collect or enforce. ### Does the GENIUS Act or CLARITY Act regulate AI agents that trade crypto? No. The GENIUS Act, signed July 2025, creates a federal framework for payment stablecoins and classifies approved stablecoins as neither securities nor deposits. The CLARITY Act, which passed the House 294-134 in July 2025, divides SEC and CFTC jurisdiction over digital assets. Neither says whether an autonomous agent is itself a stablecoin issuer, broker, or dealer; the GENIUS Act's implementing regulations, due by July 2026, are the first chance to address that. ### What should a founder do before deploying an AI agent that holds crypto? Structure the deploying entity deliberately, deciding where it is domiciled, how the agent's profits and losses are reported, and what happens to assets the agent accumulates. Put the accountability chain in writing so contracts attribute the agent's actions to a specific legal person. Foreign operators touching U.S. markets or persons should analyze their U.S. tax and regulatory obligations now, and everyone should watch the GENIUS Act rulemaking due by July 2026. This article is for informational purposes only and does not constitute legal advice. Reading this content does not create an attorney-client relationship. Laws and regulations change; readers should not rely on this content as a substitute for qualified legal counsel specific to their circumstances. Attorney Advertising. --- *Attorney Advertising. Prior results do not guarantee a similar outcome. Information provided on this website and through its automated interfaces is general legal information, not legal advice. Viewing this website, contacting the firm, or using any automated interface does not create an attorney-client relationship. No attorney-client relationship exists unless and until a written engagement agreement is signed.* --- # Structuring a U.S. Entity for a Foreign-Owned Business *Cross-Border · February 10, 2026 · David Mitchell, Esq.* > Most guidance on U.S. entity formation is written for domestic founders. When the owner is a foreign person or company, the analysis changes substantially. How to structure a U.S. entity when the owner is foreign. Canonical: https://www.newerlaw.com/posts/structuring-us-entity.html Author: David Mitchell, Esq. — https://www.newerlaw.com --- ## Key takeaways * Foreign owners have three practical U.S. structures: an LLC taxed as a pass-through, a C-Corporation taxed as a separate entity, or a branch of the foreign company. * A C-Corp generally limits the foreign owner's U.S. tax to dividends received, subject to GILTI, and is required for VC-backed companies raising institutional capital. * FDAP income such as interest, dividends, royalties, and certain rents paid to foreign persons faces 30% U.S. withholding unless an applicable treaty reduces it. * FIRPTA withholding can apply to a sale of the U.S. entity itself, not only the property, when the entity holds U.S. real estate or certain leasehold interests. Most guidance on U.S. entity formation is written for domestic founders. When the owner is a foreign person or foreign company, the analysis changes substantially — and the advice circulating online largely ignores this. The result is foreign-owned businesses that are structured correctly under state law but incorrectly for their actual tax and governance situation. This piece focuses on the decisions that matter most for foreign-owned U.S. entities: the choice of entity type, the tax treatment under U.S. and applicable treaty law, and the governance structures that protect the foreign owner's interests without triggering unintended U.S. tax exposure. ## The Entity Choice Question Foreign owners typically have three practical options: a U.S. limited liability company (LLC), a C-Corporation, or a branch of the foreign entity. Each has distinct tax and operational implications. ### LLC An LLC is treated as a pass-through entity by default under U.S. tax law. For a foreign owner, this means the foreign person is directly subject to U.S. tax on income effectively connected with a U.S. trade or business — and may trigger withholding obligations on distributions. The pass-through treatment that makes LLCs attractive for domestic owners can be disadvantageous for foreign ones, depending on the owner's home jurisdiction and applicable treaty. ### C-Corporation A C-Corp is a separate taxable entity. The foreign owner is generally taxed only on dividends received, not on the corporation's operating income (subject to GILTI and related rules for substantial foreign ownership). For many foreign-owned businesses, particularly those with active U.S. operations, the C-Corp structure offers cleaner separation between U.S. and foreign tax exposure. It is also the required structure for VC-backed startups and companies intending to raise institutional capital. ### Branch A branch is not a separate legal entity — it is simply the foreign company doing business directly in the United States. This exposes the foreign company itself to U.S. tax on branch profits and creates direct legal liability in the U.S. It is rarely the optimal structure for ongoing operations, though it may be appropriate for limited-duration projects. ## The Tax Issues Most Counsel Miss ### FIRPTA The Foreign Investment in Real Property Tax Act imposes withholding obligations on dispositions of U.S. real property interests by foreign persons. If the U.S. entity holds real estate — including certain leasehold interests — FIRPTA can apply to a sale of the entity itself, not just a direct sale of the property. This surprises many foreign owners at the point of exit. ### FDAP Withholding Fixed, determinable, annual, or periodic income paid to foreign persons is subject to 30% withholding under U.S. law, reduced by applicable treaty. Interest, dividends, royalties, and certain rents are all covered. The structure of intercompany payments between the U.S. entity and the foreign parent should be reviewed with this in mind from the outset. ### Treaty Elections Many foreign owners can reduce or eliminate U.S. withholding tax on certain payments through treaty elections, but the treaty must apply to the specific type of income and the ownership structure must satisfy the treaty's limitation on benefits provisions. Structuring the ownership incorrectly — for example, interposing an entity in a non-treaty jurisdiction — can forfeit treaty benefits entirely. ## Governance Considerations Foreign owners frequently underinvest in governance documentation at formation. The operating agreement or shareholders' agreement should address: the rights of the foreign owner to appoint directors or managers; the treatment of distributions; dispute resolution mechanisms that account for the cross-border nature of the ownership; and restrictions on transfer that comply with applicable securities laws. For C-Corps with foreign majority ownership, the governance structure should also account for CFIUS — the Committee on Foreign Investment in the United States — if the business involves technology, infrastructure, or other sensitive sectors. A transaction that triggers CFIUS review after the fact is significantly more difficult to resolve than one planned for at formation. The decisions made at formation are difficult and expensive to undo. The right structure depends on the owner's home jurisdiction, the nature of the U.S. business, anticipated capital structure, and exit horizon. These are not default questions — they require analysis specific to each situation. ## Questions and answers ### Should a foreign owner form an LLC or a C-Corp in the United States? For many foreign-owned businesses with active U.S. operations, a C-Corp offers cleaner separation: it is a separate taxable entity and the foreign owner is generally taxed only on dividends, subject to GILTI and related rules. An LLC is a pass-through by default, which makes the foreign owner directly taxable on effectively connected income and can trigger withholding on distributions. A C-Corp is also mandatory for VC-backed startups and companies raising institutional capital. ### Can a foreign company just operate in the U.S. as a branch instead of forming an entity? It can, but a branch is rarely the best structure for ongoing operations. A branch is not a separate legal entity; it is the foreign company doing business directly in the United States. That exposes the foreign company itself to U.S. tax on branch profits and to direct legal liability in the U.S. A branch may be appropriate for limited-duration projects. ### How can a foreign owner reduce U.S. withholding tax on payments from a U.S. subsidiary? Through a tax treaty election, if one applies. Payments of interest, dividends, royalties, and certain rents to foreign persons are subject to 30% U.S. withholding, reduced by an applicable treaty. To claim the reduction, the treaty must cover the specific type of income and the ownership structure must satisfy the treaty's limitation on benefits provisions. Interposing an entity in a non-treaty jurisdiction can forfeit treaty benefits entirely, so intercompany payment flows should be designed at formation. This article is for informational purposes only and does not constitute legal advice. Reading this content does not create an attorney-client relationship. Laws and regulations change; readers should not rely on this content as a substitute for qualified legal counsel specific to their circumstances. Attorney Advertising. --- *Attorney Advertising. Prior results do not guarantee a similar outcome. Information provided on this website and through its automated interfaces is general legal information, not legal advice. Viewing this website, contacting the firm, or using any automated interface does not create an attorney-client relationship. No attorney-client relationship exists unless and until a written engagement agreement is signed.* --- # What Foreign Companies Get Wrong About U.S. Entity Selection *Cross-Border · January 28, 2026 · David Mitchell, Esq.* > Foreign companies entering the U.S. market frequently choose an entity based on a single factor. The tax and liability implications most foreign counsel underestimate. Canonical: https://www.newerlaw.com/posts/foreign-companies-entity-selection.html Author: David Mitchell, Esq. — https://www.newerlaw.com --- ## Key takeaways * A foreign corporate owner of a U.S. LLC can be directly subject to U.S. tax on effectively connected income, with withholding on distributions and possible treaty complications. * Delaware suits companies raising venture or institutional capital; for other foreign-owned businesses operating in New York, it adds duplicate filings and fees with no meaningful benefit. * New York State imposes its own corporate tax and New York City a separate business tax, so a federally sound structure can still carry unexpected state and city exposure. * A foreign-owned LLC complicates a stock-sale exit because LLC interests, not stock, are sold; converting to a corporation before a sale triggers tax events and delays. Foreign companies entering the U.S. market frequently make their entity selection decision based on a single factor — usually either tax advice from their home country counsel or a quick conversation with a U.S. accountant focused narrowly on federal tax treatment. The decision deserves more analysis than either of these inputs alone provides. The choice of U.S. entity affects tax treatment, legal liability, governance, capital-raising capability, employee equity programs, and exit flexibility. It is difficult and expensive to undo. Here are the mistakes I see most often. ## Choosing an LLC Because It Sounds Simpler The LLC is often described as the most flexible U.S. entity, and for domestic owners it frequently is. For foreign owners, the default pass-through tax treatment that makes LLCs attractive for Americans creates complications. A foreign corporate owner of a U.S. LLC may find itself directly subject to U.S. tax on the LLC's effectively connected income, with withholding obligations on distributions and potential treaty complications depending on the owner's jurisdiction. The LLC is not the wrong answer for all foreign-owned businesses — but "it sounds simpler" is not a sufficient reason to choose it. The analysis should start with a clear picture of the owner's tax residence, applicable treaties, and the expected flow of funds between the U.S. entity and the foreign parent. ## Delaware by Default Delaware is the correct choice for most companies intending to raise venture capital or institutional investment. For all other foreign-owned businesses operating in New York, Delaware formation often creates unnecessary complexity: a Delaware entity operating in New York must register as a foreign entity in New York, pay New York taxes regardless, and maintain a registered agent in Delaware. The result is two sets of filings and fees with no meaningful benefit. New York formation is often the better choice for businesses with no plans to raise institutional capital, no need for Delaware's specialized corporate law, and operations primarily in New York. The analysis is not complicated, but it requires asking the question rather than defaulting to Delaware because that's what a founder's cousin did. ## Ignoring State Tax Obligations Federal tax treatment is only part of the picture. New York imposes its own corporate tax, and New York City imposes a separate business tax on companies operating within the city. Foreign-owned entities that are structured correctly at the federal level can still face significant and unexpected New York State and City tax exposure if the structure is not designed with both in mind from the outset. For companies with physical presence in multiple U.S. states — sales personnel, warehouse operations, or server infrastructure — the state tax nexus question expands further. A company that ships products from a warehouse in New Jersey may have created New Jersey tax nexus without realizing it. ## Not Planning for the Exit Entity selection affects exit options. A foreign-owned LLC that has operated successfully for years and now has a U.S. acquirer may discover that the preferred exit structure — typically a stock sale — creates complications because the LLC interests, not stock, are what's being sold. Converting the LLC to a corporation prior to a sale is possible but creates its own tax events and consumes time that a buyer under a letter of intent may not be willing to wait for. The right entity for a business that expects to be acquired in three to five years may be different from the right entity for a business that intends to operate indefinitely. This is a conversation worth having at formation, not at the point of a transaction. None of this is to say that entity selection is impossibly complex. For most foreign-owned businesses entering the U.S. market, the analysis reaches a clear answer relatively quickly. What it requires is asking the right questions at the outset — before the entity is formed, before the bank account is opened, and before the first U.S. contracts are signed. ## Questions and answers ### Should a foreign company use an LLC for its U.S. subsidiary? Often not, and never just because it sounds simpler. An LLC's default pass-through treatment means a foreign corporate owner may be directly subject to U.S. tax on the LLC's effectively connected income, face withholding on distributions, and run into treaty complications. The LLC can still be right for some foreign-owned businesses, but the decision should start with the owner's tax residence, applicable treaties, and expected fund flows to the foreign parent. ### Should a foreign-owned business incorporate in Delaware or New York? Delaware is the correct choice for most companies that intend to raise venture capital or institutional investment. For a foreign-owned business that operates primarily in New York, has no plans to raise institutional capital, and does not need Delaware's specialized corporate law, New York formation is often better. A Delaware entity operating in New York must register as a foreign entity, pay New York taxes, and keep a Delaware registered agent, producing two sets of filings with no benefit. ### Does my choice of U.S. entity affect how I can sell the business later? Yes. A foreign-owned LLC that attracts a U.S. acquirer may find that the buyer's preferred structure, typically a stock sale, does not fit because LLC interests rather than stock are sold. Converting the LLC to a corporation before the sale is possible but creates its own tax events and takes time a buyer under a letter of intent may not tolerate. A business expecting acquisition within three to five years may need a different entity than one operating indefinitely. This article is for informational purposes only and does not constitute legal advice. Reading this content does not create an attorney-client relationship. Laws and regulations change; readers should not rely on this content as a substitute for qualified legal counsel specific to their circumstances. Attorney Advertising. --- *Attorney Advertising. Prior results do not guarantee a similar outcome. Information provided on this website and through its automated interfaces is general legal information, not legal advice. Viewing this website, contacting the firm, or using any automated interface does not create an attorney-client relationship. No attorney-client relationship exists unless and until a written engagement agreement is signed.* --- # SAFEs, Side Letters, and Stealth Governance *Venture Capital · January 14, 2026 · David Mitchell, Esq.* > The SAFE was designed to give early investors no governance rights. Side letters and related instruments can quietly reintroduce them. What founders should look for before signing. Canonical: https://www.newerlaw.com/posts/safe-not-simple.html Author: David Mitchell, Esq. — https://www.newerlaw.com --- ## Key takeaways * Section 1(c) of the YC post-money SAFE gives investors no voting, dividend, or consent rights until conversion; side letters are how investors reintroduce governance. * A side letter negative covenant requiring investor consent before a sale or new equity issuance is economically a veto right, even though it never appears on the cap table. * SAFE holders are not stockholders of record, so Delaware Section 220 inspection rights do not reach them; only a contractual side letter right fills that gap. * In Seed River v. AON3D, the court found breach of a SAFE side letter but denied an injunction because the letter lacked an express equitable remedy clause. The Simple Agreement for Future Equity was designed, deliberately, to give early investors no governance rights. Y Combinator's form is explicit on this point: Section 1(c) of the standard post-money SAFE states that the investor "is not entitled, as a holder of this instrument, to vote or receive dividends or be deemed the holder of Capital Stock for any purpose," and has no right to "give or withhold consent to any corporate action" until the SAFE converts to equity. This is intentional. The SAFE was conceived as a clean instrument for early capital — uncomplicated by the board composition negotiations, protective provisions, and consent mechanics that belong in a priced equity round. Founders give up economics; governance gets deferred. That's the deal. The problem is what happens alongside the SAFE. ## The Side Letter as Governance Vehicle Many investors — particularly institutional angels, family offices, and established seed funds — will not commit capital on a bare SAFE without additional assurances. They negotiate a side letter: a separately executed agreement that runs alongside the SAFE and binds the company to obligations the SAFE instrument itself deliberately excludes. Three categories of side letter provisions are worth examining in detail, because each introduces a form of governance influence the SAFE was designed to prevent. ### Information Rights Standard side letters grant the investor rights to receive quarterly and annual financial statements, monthly management accounts at higher investment thresholds, cap table updates upon material changes, and notice of significant corporate events. These sound benign — and in many cases they are. But information rights create obligations that run continuously until the SAFE converts or the right expires by its terms. A company that fails to deliver required reports is in breach of contract, regardless of whether any harm flows from the omission. More consequentially, information rights establish a relationship of ongoing disclosure between the company and a person who has no formal governance role. An investor receiving monthly financials is in a position to observe trends, flag concerns to other investors, and condition their ongoing goodwill on management decisions they cannot formally influence. This is informal governance — and it is often exercised. ### Inspection Rights Inspection rights give the investor the ability to examine books, records, and sometimes facilities at reasonable times. The legal significance here is structural: SAFE holders are not stockholders of record. Delaware General Corporation Law Section 220, which allows stockholders to inspect books and records upon showing a "proper purpose," does not apply to SAFE investors — they haven't received stock yet. The 2025 amendments to Section 220 narrowed the statute further, making this gap even more pronounced. A side letter inspection right fills that gap contractually. It transforms the investor from someone with no legal access to company records into someone with broad contractual access. That right can be exercised before a priced round, during a disputed transaction, or in advance of litigation — and the company cannot easily refuse it without breaching the side letter. ### Negative Covenants Negative covenants are the most consequential side letter provision. These are contractual restrictions requiring company consent — typically the investor's consent — before the company takes specified actions. Common examples include: * Incurring indebtedness above a defined threshold * Issuing new equity securities (beyond standard option plans) * Selling or licensing material assets * Entering into a change of control transaction * Amending charter or organizational documents * Materially changing the nature of the business A negative covenant requiring investor consent before a sale of the company is, economically, a veto right. It is not labeled as one. It does not appear in the SAFE. It is not part of the cap table or the corporate governance documents. But it is legally binding, and it constrains what the founders can do without that investor's agreement. ## Fragmentation: When Side Letters Stack The governance problem compounds when a company closes multiple SAFE rounds with multiple investors, each of whom negotiates a separate side letter. Investor A has quarterly financials and inspection rights. Investor B has monthly financials, an MFN clause, and a veto on acquisitions above $50 million. Investor C has a pro-rata right and a negative covenant on new equity issuances. Investor D has inspection rights and a requirement that the company maintain a minimum cash balance. None of these investors controls the company. None has a board seat. None appears in the corporate governance documents. But collectively, they have created a web of bilateral contractual obligations that fragments what the founders thought was unencumbered discretion. This is what practitioners have begun calling stealth governance fragmentation: the accumulation of informal governance influence through side letters that do not appear on the face of the SAFE instrument and are not visible in a standard cap table review. Elisabeth de Fontenay and Yaron Nili's empirical study, *Side Letter Governance* (100 Wash. U. L. Rev. 907, 2023), documents that side letters have grown "substantially in both length and complexity over time" and impose "significant costs and delay on capital-raising." The authors attribute the proliferation partly to lawyer agency costs: counsel has "little economic incentive to coordinate and to reduce their billings" by standardizing language — leaving each investor's counsel to negotiate bespoke terms, and leaving companies holding a growing stack of inconsistent obligations. The practical consequences emerge at several pressure points. **MFN cascade.** An investor with an MFN clause is entitled to the benefit of any more favorable terms the company grants to a later investor. If the company grants a subsequent SAFE investor a lower valuation cap — for example, because circumstances have changed — the MFN investor can elect to convert on those terms. Companies often lose track of these provisions, particularly as the SAFE stack grows. The breach is silent until the MFN investor raises it. **Series A friction.** When a lead investor arrives for a priced round and conducts due diligence, they will find the side letter stack. Standard practice is to require harmonization or termination of all prior side letter commitments as a closing condition. SAFE investors who resist waiving their rights can delay or complicate a closing that the founders consider critical. The investor with a veto on equity issuances has, in effect, leverage at a moment when the founders are most vulnerable. **Unknown breach.** Companies routinely breach side letter obligations inadvertently. A company that issues new equity in a routine option grant without checking whether any side letter requires investor consent may be in breach without knowing it. That breach becomes a liability that surfaces during due diligence in a later transaction — often at a time when it cannot be easily remedied without the breaching party agreeing to a waiver. ## What the Cases Show Seed River, LLC v. AON3D, Inc. · D. Del. 2023 The most direct reported case on SAFE side letter enforcement. Seed River held a SAFE in AON3D, a Delaware 3D printing startup, alongside a side letter that required AON3D to provide quarterly and annual financial statements and to permit account inspection. The company provided nothing and blocked access. Seed River sued in the District of Delaware (No. 21-1497). The court found a breach of contract but denied injunctive relief because the side letter contained no express equitable remedy provision. Seed River was left to pursue damages — a slower and less satisfying remedy than the access it sought. The case establishes that side letter information and inspection rights are enforceable contracts, but it also illustrates the enforcement problem: an investor who wants access to records before a triggering event must litigate to get it, and may not obtain interim relief without the right drafting. Crashfund, LLC v. FaZe Clan, Inc. · Mass. Super. Ct. 2020 Investors held SAFEs in Wanderset Inc. that entitled them to convert on a "change of control." Wanderset merged with FaZe Clan but structured the transaction as an asset transfer rather than a formal statutory merger — apparently to avoid triggering conversion rights. Judge Kenneth Salinger of the Business Litigation Session held that the plain SAFE language only required conversion on a formal merger, not a de facto one, and dismissed the conversion claim. But he allowed the investors' implied covenant of good faith claim to proceed, finding that deliberately engineering a transaction structure to deprive investors of contractual rights was potentially actionable. The significance: courts will look past technical compliance when a founder structures a transaction specifically to defeat investor rights. The implied covenant creates a floor. But the investors in *Crashfund* had to litigate to enforce it — and the outcome was a claim that proceeded, not a conversion that happened. BlackRock and Hedosophia v. Bolt Financial · Del. Ch. 2024 Bolt Financial's 2024 attempt to close a $450 million Series F at a structurally coercive valuation — one that would have crammed down all existing preferred stockholders — was halted by a temporary restraining order issued by the Delaware Court of Chancery (No. 2024-0918). BlackRock and Hedosophia, existing investors with contractual consent rights over material equity issuances, sued to block the round. The court issued the TRO within the timeframe requested, finding the investors had sufficiently demonstrated likely harm and likely success on the merits of their consent rights claim. Bolt is not a SAFE case — it involves preferred stockholder protective provisions rather than side letters. But it is the clearest demonstration in recent years that investors who hold contractual consent rights can obtain emergency injunctive relief in the Delaware Court of Chancery when those rights are threatened. The lesson transfers directly to well-drafted negative covenants in SAFE side letters. FTX Investor Governance Failure · 2022 Over 60 investors committed approximately $1.8 billion to FTX's 2021-2022 fundraising, including Sequoia ($214 million), SoftBank, Tiger Global, and Temasek. None of them obtained meaningful governance rights. When Sequoia and others requested board seats, Sam Bankman-Fried declined, telling investors their ownership was too small to warrant one. Multiple institutions accepted this and invested without contractual information rights, board representation, or audit requirements. FTX's board consisted of three people, including Bankman-Fried himself. There was no audit committee, no internal audit function, no board meetings, and financial statements prepared by a small firm in the Bahamas. When the company collapsed, John Ray III — appointed as new CEO in bankruptcy — stated: "Never in my career have I seen such a complete failure of corporate control and such a complete absence of trustworthy financial information." FTX is the paradigmatic case for the cost of waiving information rights at scale. The investors who lost hundreds of millions had no contractual mechanism to detect what was happening. A side letter with basic information rights would not have prevented the fraud — but it would have created the legal scaffolding to detect it earlier and potentially to act. ## The Drafting Problem The fragmentation problem is partly a drafting problem. Side letters negotiated separately, without reference to each other, produce obligations that conflict or overlap. An MFN clause that requires the most favorable terms across all future SAFEs interacts unpredictably with pro-rata rights granted to a later investor. A negative covenant on equity issuances conflicts with the company's obligation to reserve shares for an employee option pool. These are not hypothetical complications — they are regular features of SAFE stacks that have accumulated over multiple rounds. The solution is not to refuse side letters. Information rights and inspection rights serve legitimate investor interests, and a sophisticated investor is right to want them. The solution is to treat the side letter stack as a governance document that requires active management: drafting each side letter with knowledge of the others, including clear termination provisions, and conducting periodic audits of outstanding obligations as the cap table evolves. For founders, the more important practice is to understand what each side letter commits the company to before signing it. A negative covenant requiring consent for equity issuances above a threshold is not a standard administrative provision — it is a veto right. It should be evaluated as one. The SAFE was designed to defer governance complexity. Side letters import it back in. The resulting structure is not the clean instrument the parties thought they were signing — it is a layered set of obligations that constrains both the company and its investors in ways that neither fully anticipated. ## Questions and answers ### Do SAFE investors have any governance or voting rights? Not under the SAFE itself. Section 1(c) of Y Combinator's standard post-money SAFE states the holder cannot vote, receive dividends, be treated as a holder of capital stock, or give or withhold consent to corporate action until the SAFE converts. Governance rights arrive instead through separately negotiated side letters, which commonly grant information rights, inspection rights, and negative covenants that require investor consent before specified company actions. ### Are SAFE side letters legally enforceable? Yes. In Seed River, LLC v. AON3D, Inc. (D. Del. 2023), the court found the company breached a side letter by withholding financial statements and blocking inspection, but denied injunctive relief because the letter had no express equitable remedy provision, leaving the investor to pursue damages. In Crashfund v. FaZe Clan (Mass. Super. Ct. 2020), a claim that the founders structured a deal to evade SAFE conversion rights proceeded under the implied covenant of good faith. ### What happens to SAFE side letters when we raise a Series A? The lead investor will find the side letter stack in due diligence and will typically require every prior side letter to be harmonized or terminated as a closing condition. SAFE investors who refuse to waive their rights can delay or complicate the closing, and an investor holding a veto on equity issuances has leverage at that moment. Diligence also surfaces inadvertent breaches, such as option grants made without a required consent or MFN clauses triggered by a lower cap. This article is for informational purposes only and does not constitute legal advice. Reading this content does not create an attorney-client relationship. Laws and regulations change; readers should not rely on this content as a substitute for qualified legal counsel specific to their circumstances. Attorney Advertising. --- *Attorney Advertising. Prior results do not guarantee a similar outcome. Information provided on this website and through its automated interfaces is general legal information, not legal advice. Viewing this website, contacting the firm, or using any automated interface does not create an attorney-client relationship. No attorney-client relationship exists unless and until a written engagement agreement is signed.* --- # EB-5 After the Reform Act *Immigration · December 19, 2025 · David Mitchell, Esq.* > The EB-5 Reform and Integrity Act of 2022 restructured the immigrant investor program: higher investment amounts, set-aside categories, and a rebuilt regional center regime. What investors need to know now. Canonical: https://www.newerlaw.com/posts/eb5-after-reform-act.html Author: David Mitchell, Esq. — https://www.newerlaw.com --- ## Key takeaways * Under the EB-5 Reform and Integrity Act of 2022, the standard investment is $1,050,000 and the Targeted Employment Area amount is $800,000, both now inflation-adjusted. * Twenty percent of EB-5 visas are reserved for rural projects, and those visas do not retrogress for oversubscribed countries such as China, India, and Vietnam. * Ten percent of visas are set aside for high-unemployment TEAs and two percent for infrastructure projects, but the high-unemployment category still retrogresses for backlogged countries. * The Reform Act authorizes concurrent filing of the I-526E petition and adjustment of status when a visa number is immediately available, shortening the path to work authorization. The EB-5 Immigrant Investor Program was substantially restructured by the EB-5 Reform and Integrity Act of 2022, which was enacted as part of the Consolidated Appropriations Act. The changes were significant — investment amounts increased, set-aside categories were created, and the regional center program was reauthorized with new compliance requirements. Investors and their counsel who are working from pre-2022 frameworks are operating with outdated information. This piece outlines the most significant changes and their practical implications for investors considering the EB-5 pathway to U.S. permanent residence. ## Investment Amount Changes The standard EB-5 investment amount increased to $1,050,000, up from $900,000. For investments in Targeted Employment Areas — rural areas or areas with high unemployment — the amount is $800,000, up from $450,000. These amounts are subject to inflation adjustment going forward, which is new. The substantial increase in the TEA investment amount is significant. Much of the EB-5 market prior to the reform consisted of urban projects structured to qualify as TEAs through geographic manipulation — a practice the reform was specifically intended to curtail. The new rural set-aside category (discussed below) partially addresses this, but the overall capital requirements for EB-5 are materially higher than they were under the pre-reform framework. ## Visa Set-Asides The Reform Act created reserved visa categories that were not present in the prior program structure: ### Rural Set-Aside Twenty percent of EB-5 visas in each fiscal year are reserved for investors in rural projects — those located outside metropolitan statistical areas and outside the boundary of any city or town with a population of 20,000 or more. These visas do not retrogress for oversubscribed countries, and any unused rural visas roll over to the general pool. For investors from China, India, or Vietnam — countries with historically long EB-5 backlogs — the rural set-aside represents a materially faster path to permanent residence. ### High Unemployment TEA Set-Aside Ten percent of visas are reserved for investments in high-unemployment TEAs. These are areas where the unemployment rate is at least 150% of the national average. Unlike the rural set-aside, these visas do retrogress for oversubscribed countries. ### Infrastructure Set-Aside Two percent of visas are reserved for investments in projects involving infrastructure — transportation, clean water, broadband, and similar assets. This category is largely untested in practice as of this writing. ## Regional Center Reauthorization and Integrity Measures The regional center program — through which most EB-5 investments are made — was allowed to lapse in 2021 and was reauthorized by the Reform Act with new compliance requirements. Regional centers must now register with USCIS annually, submit compliance reports, and meet enhanced disclosure obligations to investors. The Reform Act also created a new investor protection framework. Investors have explicit rights to receive audited financial statements, material change notifications, and project updates. Regional centers that fail to comply can have their designation terminated, which would affect all pending investor petitions. For investors, this means due diligence on the regional center's compliance status and track record is now part of the investment analysis, not just a footnote. ## Concurrent Filing One of the most investor-friendly provisions of the Reform Act is the explicit authorization of concurrent filing — the ability to file an I-526E petition and an adjustment of status application simultaneously, provided a visa number is immediately available. For investors already in the United States in a valid nonimmigrant status, this can significantly reduce the time between investment and work authorization. The practical impact depends on country of birth and visa availability. Investors born in countries without retrogression — including most European, Latin American, and African countries — can benefit immediately from concurrent filing. Investors born in China, India, or Vietnam face retrogression and will need to evaluate the set-aside categories carefully. EB-5 remains one of the most viable pathways to U.S. permanent residence for investors who meet the capital requirements and have a medium-term timeline. The reform has made the program more complex to navigate but also more transparent and investor-protective than it was before. Selecting the right project, regional center, and filing strategy requires analysis specific to each investor's circumstances. ## Questions and answers ### How much do I need to invest for an EB-5 visa after the 2022 Reform Act? The minimum EB-5 investment is $1,050,000, or $800,000 for a project in a Targeted Employment Area, meaning a rural area or an area with high unemployment. These figures replaced the prior $900,000 and $450,000 thresholds and are now subject to inflation adjustment. The large jump in the TEA amount was intended to curb urban projects that had qualified as TEAs through geographic manipulation. ### Is the rural EB-5 set-aside faster for investors born in China or India? Yes. Twenty percent of EB-5 visas each fiscal year are reserved for rural projects, located outside metropolitan statistical areas and outside any city or town of 20,000 or more people. Those visas do not retrogress for oversubscribed countries, and unused rural visas roll into the general pool. For investors born in China, India, or Vietnam, the rural set-aside is a materially faster route to permanent residence than the general category. ### Can I file my EB-5 petition and green card application at the same time? Yes, if a visa number is immediately available. The Reform Act explicitly authorizes concurrent filing of the I-526E petition and an adjustment of status application. Investors already in the United States in valid nonimmigrant status can use this to cut the time between investment and work authorization. Investors born in countries without retrogression, including most European, Latin American, and African countries, benefit immediately; those born in China, India, or Vietnam must weigh the set-aside categories. This article is for informational purposes only and does not constitute legal advice. Reading this content does not create an attorney-client relationship. 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