Corporate Transparency Act Compliance

On January 1, 2021, the Corporate Transparency Act (“CTA”) was enacted as part of the National Defense Authorization Act of 2021 to combat money laundering. The CTA requires a "Reporting Company" (no matter when it was formed) to report certain information about the entity and any "Beneficial Owner" to the Treasury Department's Financial Crimes
Enforcement Network ("FinCEN"). With limited exceptions, any domestic entity and any foreign entity registered to do business in the United States is a "reporting company" and must file a report. The reality of this law is that millions of legitimate companies, including inactive entities, are now subjected to the new reporting requirements.

The information below is meant to provide you with general information regarding the new CTA reporting requirements. Please note that this does not constitute the provision of legal advice, which will only be provided to you following engagement with the firm.

What is a Reporting Company?

A Reporting Company is any domestic entity formed via a filing with a state (e.g., corporations, LLCs, some partnerships – even inactive entities) or a foreign entity that registers to do business in a US state. There are 23 exemptions from the Reporting Company definition, most of which are for regulated industries or larger businesses.

Who is a Beneficial Owner?

A Beneficial Owner is any individual who, directly or indirectly, has "substantial control" over the Reporting Company or owns at least 25% of the entity. Persons with "substantial control" include senior officers and persons with the power to appoint or remove senior officers or persons who can substantially influence important company decisions. However, the "substantial control" rules are very expansive and may result in unexpected persons being classified as Beneficial Owners.

What Information Must be Reported?

A Reporting Company must report its legal name, any "doing business as" name, EIN (or foreign equivalent), physical business address, and jurisdiction. For its Beneficial Owners, the Reporting Company must report their legal name, date of birth, residential address, and an identifying number from a non-expired passport, state issued identification, or driver's license. In addition, an image of the identifying document must be submitted to FinCEN.

When is Reporting Due?

Reporting Companies formed during 2024 will have 90 days to file an initial report but entities formed after January 1, 2025, will only have 30 days to report. If any information changes or is incorrect, an updated report must be filed within 30 days. Reporting Companies formed before January 1, 2024, have until December 31, 2024, to report, but we encourage you not to wait.

What if I don’t file?

It must be emphasized that willful violations of the CTA's reporting requirements can result in penalties, including civil penalties of up to $500 per day that a violation is not remedied, a criminal fine of up to $10,000, and/or imprisonment of up to two years.

What should I do?

CTA analysis and compliance is a legal service, so it is necessary for legal counsel to ultimately opine on the filing requirements. Please contact us today to help keep you compliant.