In 2021 Congress passed the Corporate Transparency Act (“CTA”) for the purposes of streamlining the collection and reporting of beneficial ownership information for limited liability companies and other business entities that were created in or are registered to do business in the United States. The CTA mandates that certain information about the business’ owners must be provided to the Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN). Significant penalties exist for noncompliance.
This law is building on the Anti-Money Laundering Act of 2020, which was implemented to crackdown on illegal activity like corruption, money laundering, terrorist financing and tax fraud. It is believed that increasing the transparency of owner information will prevent criminals from hiding their illegal gains, cash and/or property in the United States.
Beginning on January 1, 2024, and if your business is subject to the CTA, you will need to file a beneficial owner report with FinCEN. This report will include each beneficial owner’s:
- full legal name;
- birth date;
- legal address; and
- an identifying number from a driver’s license, passport or other approved legal document, as well as a photograph of the document displaying the identifying number.
In addition to the owner information, you will also need to provide your company’s:
- legal name;
- any trade name/dba (doing business as);
- legal address; and
- jurisdiction where it was formed or first registered and its taxpayer identification number.
Once reported, FinCEN will include this information in a database for use by authorized government authorities and financial institutions. The database will not be publicly accessible.
While the CTA was passed in 2021, it did not go into effect right away. Congress wanted to give FinCEN time to write regulations governing how the law should be applied and to give businesses a “heads-up” about the new law. Almost two years later, FinCEN official issued their final rule in September 2022.
The final rule and its regulations will go into effect as early as January 1, 2024. Violations of the CTA and noncompliance with reporting requirements can have severe consequences (a $500-a-day penalty, up to $10,000, and up to two years’ imprisonment), so it is important to comply.
Who Is Required to File?
Corporations, limited liability companies, and other business entities that were created by a filing with a secretary of state or a similar office to create the entity or, for foreign companies, a registration to do business in the United States.
The CTA contains 23 exemptions for a majority of large companies, such as publicly traded corporations and businesses that the federal government heavily regulates. The exemption also includes any business that meets all of the following criteria:
- Employs more than 20 employees;
- Reports more than $5 million in gross receipts; and
- Maintains a physical presence at a business office in the United States.
When Do You Need to File?
If your company was created or registered before January 1, 2024, you are required to file by January 1, 2025.
The Goosmann Law Firm is Here To Assist.
As we navigate through the complexities of the new legislation, our team at Goosmann Law is committed to providing tailored solutions and guidance to our clients. With the rise in fraud schemes, offshore money laundering, and other illegal activities, the CTA serves as another tool in the government's efforts to curb such actions.
Our CTA Team is ready to help you navigate compliance. To learn more about our dedicated team click here.
