The Corporate Transparency Act imposes new reporting requirements on certain businesses as of January 1, 2024.

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The Corporate Transparency Act is a federal law aimed at promoting transparency in the ownership of certain entities and preventing money laundering and illicit financial activities.

Under this law, the entities described below must report certain information to the Financial Crimes Enforcement Network (FinCEN) regarding their Beneficial Owners and Company Applicant(s), as defined below.

Who must comply?

The CTA applies to entities (the “Reporting Companies”) that meet ALL of the following criteria:

  • Corporations, LLCs, or similar entities created by the filing of an organizational document with state officials, as well as foreign entities registered to do business in the United States;
  • Entities with 20 or fewer full-time employees; and
  • Entities with U.S. sourced gross receipts or sales of equal or less than $5 million reported in the prior tax year.

If your business meets all of these, you are likely subject to the CTA’s requirements; however, there are some limited exemptions for certain types of entities (i.e., generally those which have separate transparency regulatory obligations, such as financial institutions, or registered insurance or securities providers).

If you need further guidance as to whether your entity is exempt from the CTA, please contact us directl.

Key CTA related definitions

“Beneficial Owner” is generally defined as any individual (ultimate natural person) who owns, directly or indirectly, at least 25% of the Reporting Company or exercises Substantial Control (e.g., individuals who direct, determine, or have substantial influence over important decisions made by the Reporting Company) over the Reporting Company.

“Company Applicant” is defined to mean the person who filed a Reporting Company’s formation document or registers it to do business in the United States, as well as the person directing such filing.

Important deadlines

Entities created before January 1, 2024, must file by January 1, 2025.

Entities created on or after January 1, 2024, but before January 1, 2025, will have 90 days from the date of formation to file a report.

Entities created on or after January 1, 2025, will have 30 days from the date of formation to file a report.

* Changes in Ownership

Going forward, you must also report any changes in the Beneficial Owners of a Reporting Company, or any changes to the information provided as part of the CTA with respect to these persons (such as changes of address, upon expiration of government issued documents) within thirty (30) days of the change.

What information must be reported?

When filing a report under the CTA, you will need to provide the following information:

Reporting company information:

  • Identifying information of Reporting Company, including its full name, any name used for doing business, state and date of formation, tax identification number, mailing address, and principal place of business (which, under the current guidelines, would seem to indicate that this cannot be a P.O. Box and must be a U.S. street address).

Beneficial owner/company applicant(s) information:

  • The full legal name and address of each Beneficial Owner/Company Applicant;
  • Each Beneficial Owner’s/Company Applicant’s date of birth;
  • Each Beneficial Owner’s/Company Applicant’s government issued document with a unique identification number and photograph (e.g., driver’s license or passport); and
  • The date on which each individual became a Beneficial Owner.

According to the CTA, Company Applicant related information must only be reported if the Reporting Company was formed or registered to do business as of January 1, 2024. As such, Reporting Companies which were formed or registered to do business prior to January 1, 2024, do not need to submit Company Applicant information.

Please be aware that failure to comply with the CTA’s reporting requirements

may result in civil and criminal penalties.