NEW YORK STATE CHANGES TO EXECUTIVE LAW FOR NOTARY PUBLICS

April 7, 2023

By: Christopher J. Babiarz, Esq.



On January 31st, 2023, New York State implemented new changes to the rules and regulations concerning Notary Publics which imposes additional important requirements on all notaries whether they are performing traditional notary services, or electronic notary services.


The most significant new change is the requirement that all types of notaries keep a journal documenting all notarial acts performed for a period of ten years.  The journal must track the following required pieces of information:


1. The date and time the notarial service was performed; and

2. The name and address of the principal (individual whose signature is being notarized); and

3. The number and type of notarial service performed; and

4. The type of credential used to verify the identity of the principal; and

5. The verification procedure used to confirm the principal's identity.


In addition to the five above categories, notaries performing electronic notarization must also document:


6. Identification of the communication technology, certification authority, and verification providers used; and

7. An actual audio and video recording of the act.


While these requirements apply to all notaries performing all types of notarial services, real property transactions are especially vulnerable to fraud, and the notary public is the first line of defense in preventing such crimes.  Fraud involving notaries typically occurs in one of two ways, and diligently adhering to the above-described process significantly helps to eliminate both.


The most obvious way that fraud is committed is when someone tries to get a document notarized and they are not the principal that they are claiming to be.  This type of circumstance can present itself a few different ways, such as by presenting a forged document that has already been signed outside the presence of a notary, and the individual is now seeking to have it notarized after the fact.  Or in a similar situation, the fraudster could be trying to get you to notarize a document without presenting a valid form of identification with a signature to compare to.


By routinely following a patterned behavior whenever you notarize a document you can avoid being implicated in this type of fraud entirely.  The requirements of the journal set forth core pieces of information that will eliminate many types of fraud just by carefully collecting this information in a methodical way.  While there are different credentials and/or personal knowledge which can be used to comply with item 4 in the journal list above, the gold standard would be a government issued photo ID or driver's license.  If an individual is asking you to notarize without providing this particular document, that should trigger a red flag in your mind, and cause you to take a pause and re-evaluate the circumstance to make sure you are being compliant with the requirements above.  A notary may always refuse to provide a notarization service if they are not satisfied with the proof of identity, or if there is concern that the principal lacks capacity to execute a record, or if the notary suspects it is done so under duress.


The second type of fraud is less preventable on the part of the notary, but the impacts and inconveniences are also able to be greatly diminished by diligent journal keeping.  This type of fraud occurs when someone forges your notary stamp/seal using publicly available records.  In this scenario, your seal may be used to complete documents for recording with the county clerk that you will have never seen before, let alone have been in the same room as the person claiming to be the principal.  It is in this circumstance that being able to point to a meticulously kept journal that adheres to a consistent process will enable you to prove that you were not involved in the fraudulent notarization process and help you clear your name more efficiently than any other preventative measure. 


In addition to the above described journal keeping requirements, New York has also clarified the current rules concerning electronic notarization. Previously during the height of the pandemic, notaries were able to provide services via programs such as Zoom and Skype, this program was known as Remote Ink Notarization.  Although this program has since been removed, New York is seeking to replace it with Electronic Notarization. The key difference between these two programs is that electronic notarization requires the use of specialized commercial software which allows the notary to perform identity proofing and credential analysis. Although New York has not provided significant guidance on recommended programs to use for this purpose, we can anticipate that many reputable companies such as title companies will begin to rollout New York compliant programs that provide the above services, and allow for the recordation and storage of audio and video. Until and unless this program and software is in place, the important takeaway is that no notaries should be providing services through programs such as Skype or Zoom in New York without such additional software features. Electronic notarization is an additional program on top of traditional notarization, and must be applied for separately.


Whether you are performing an electronic notarization or a traditional notarization, the requirement to keep a journal is mandatory.  While the imposition of additional requirements on Notary Publics in New York may seem frustrating, they are truly designed in a way to protect the integrity of the notary service, and it also serves as an important safeguard to protect the individual notary as well from those seeking to commit fraud.


This article is intended to be for informational and discussion purposes only and is not to be construed as legal advice or as a legal opinion on which certain actions should or should not be taken.

Important Notice for New York State LLCs: Addressing the 30-Year Limit Expiration

August 8, 2024
By: Nicholas J. Graham, Esq. Limited Liability Companies ("LLC") have been authorized in New York since 1994. When the law was first enacted, an LLC could not have perpetual existence like corporations. This limitation was removed in 1997. If your LLC was established under the old New York State law that imposed a 30-year lifespan, it's crucial to be aware of the approaching expiration of your company's duration. Originally, LLCs in New York were required to specify a limited duration, commonly set at 30 years. Many of these companies are now reaching the end of this period and must take action to continue operating. Special attention should be given to LLC's formed between 1994 and 1997, as they were likely established with a 30-year lifespan. What Has Changed? The law in New York has evolved, and LLCs are no longer bound by the 30-year limit. Pursuant to NY LLC law §701(1), businesses now have the option to exist perpetually, providing greater flexibility and stability for long-term planning. However, this change is not automatic for existing LLCs that were originally set up with a 30-year term. What You Need to Do To ensure your LLC can continue its operations beyond the original 30-year term, you need to file an amended Articles of Organization with the New York Department of State. This amendment should update the duration of your LLC to perpetual, or to another term if desired. Steps to Amend Your Articles of Organization: Prepare the Amendment: Draft an amendment to your LLC's Articles of Organization. This document should clearly state the new duration of the LLC, typically set to "perpetual." File the Amendment: Submit the amended Articles of Organization to the New York Department of State. This can usually be done online or by mail. Ensure that you include the necessary filing fee. Update Internal Documents: Reflect the change in your LLC's operating agreement and any other internal documents to ensure consistency and compliance. Notify Members and Stakeholders: Inform all members and relevant stakeholders of the change to ensure everyone is aware of the updated status of the LLC. Why It Matters Failing to update your LLC’s duration could result in the automatic dissolution of the company once the original 30-year term expires. This could lead to significant disruptions in business operations and potential legal complications. By taking proactive steps to amend your Articles of Organization, you can ensure the continuity of your LLC and take advantage of the flexibility offered by the current laws. Need Assistance? The Scolaro Law Firm specializes in helping businesses navigate changes in regulatory requirements. If you need assistance with amending your Articles of Organization or have any questions regarding your LLC's status, please contact us. Our experienced team is here to provide the guidance and support you need to keep your business running smoothly. This article is intended to be for informational and discussion purposes only and is not to be construed as legal advice or as a legal opinion on which certain actions should or should not be taken.

SMB M&A SERIES: Financing Business Acquisitions with SBA 7(a) and 504 Loans

July 23, 2024
By: Nicholas J. Graham, Esq. The SMB M&A series provides insights into buying and selling a small business. For business buyers looking to acquire a small business, securing the right financing is often a critical step. The U.S. Small Business Administration (SBA) offers two popular loan programs that can be invaluable in this process: the 7(a) loan and the 504 loan. These loans are available through local lenders and are partially guaranteed by the SBA, reducing the risk for lenders and making it easier for small businesses and entrepreneurs to obtain financing. Both programs provide favorable terms that can make acquiring a business more achievable. Here’s a closer look at how each can be used, with a particular focus on the flexibility of the 7(a) loan, as it is more commonly used for business acquisitions. The SBA 7(a) Loan Program The 7(a) loan program is the SBA’s most popular and flexible loan option. It is designed to help small businesses and entrepreneurs obtain financing when they might not be eligible for traditional financing options. Here are the key advantages and uses of the 7(a) loan for business acquisitions: 1. Broad Eligibility and Use of Funds: The 7(a) loan can be used for a variety of purposes, including purchasing a business which can include goodwill, buying out partners, acquiring real estate, and refinancing existing debt. This flexibility makes it an ideal choice for business acquisitions where the buyer may need to cover multiple types of expenses. 2. Favorable Terms and Conditions: 7(a) loans offer competitive interest rates, long repayment terms (up to 10 years for business acquisitions), and lower down payment requirements compared to conventional loans. These favorable terms can ease the financial burden on buyers and improve cash flow during the critical early stages of ownership. 3. Working Capital Inclusion: One significant advantage of the 7(a) loan is the ability to include working capital in the loan amount. This can provide new business owners with the necessary liquidity to manage day-to-day operations, especially important during the transition period post-acquisition. 4. Collateral Flexibility: While the SBA prefers loans to be fully collateralized, a 7(a) loan can still be approved even if sufficient collateral is not available. This can be a major benefit for buyers who have limited assets to pledge. The SBA 504 Loan Program The 504 loan program is another powerful financing tool, primarily focused on fixed assets such as real estate and equipment. It involves a partnership between the SBA, a Certified Development Company (“CDC”), and a private lender. Here’s how it works for business acquisitions: 1. Structured Financing: A 504 loan typically consists of three parts: a loan from a private sector lender covering 50% of the project cost, a loan from a CDC covering up to 40%, and a 10% down payment from the borrower. This structure can reduce the amount of equity the buyer needs to provide upfront. 2. Long-Term Fixed Rates: The 504 loan offers long-term fixed interest rates, which can provide stability and predictability for business owners. This is particularly beneficial when acquiring property as part of the business purchase. 3. Real Estate and Equipment Focus: While the 504 loan is less flexible than the 7(a) loan in terms of eligible uses, it is ideal for acquisitions that involve significant real estate or heavy equipment investments. The ability to finance these assets over a long term with a fixed rate can be a strategic advantage. Conclusion Navigating the complexities of financing a business acquisition can be challenging, but SBA loans offer valuable tools to help buyers achieve their goals. The 7(a) loan’s flexibility and broad eligibility make it a particularly attractive option, while the 504 loan’s fixed-rate, long-term structure provides stability for significant asset purchases. However, to truly capitalize on these advantages, it's essential to structure the transaction properly and adhere to all eligibility criteria and regulatory requirements. With careful planning and compliance, SBA loans can provide the financial support needed to successfully acquire and grow a business. If you’re considering buying a business and exploring SBA loan options, our experienced M&A team at Scolaro Fetter Grizanti & McGough, P.C. is here to help. Our team handles small business M&A transactions throughout New York State, Vermont, Pennsylvania and Florida. This article is intended to be for informational and discussion purposes only and is not to be construed as legal advice or as a legal opinion on which certain actions should or should not be taken.
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