The Corporate Transparency Act (the “CTA”), which goes into effect on January 1, 2024, affects existing and prospective companies in the United States. It is imperative for business owners to understand that it is their responsibility to comply with all reporting requirements under the CTA. Failure to comply may result in significant penalties.
The CTA requires most companies registered to do business in the United States to submit information regarding the individuals who directly or indirectly own or control that company to the Financial Crimes Enforcement Network (“FinCEN”), a bureau within the U.S. Department of Treasury. The following are certain key items in the CTA:
- The CTA applies to any “reporting company,” which is defined as any company registered to do business in the United States, with limited exemptions (some of which are noted below). This generally includes all domestic companies as well as foreign companies authorized to do business within the U.S.
- The “reporting company” will be required to submit information about (1) the company itself, (2) the “beneficial owners”, who are individual(s) who directly or indirectly own at least 25% of or exercise substantial control over the company, and (3) for all companies formed after January 1, 2024, the “company applicant.”
- The “company applicant” is the individual who directly files or is responsible for the filing of the company’s creation or registration paperwork with the applicable secretary of state or similar office.
- Required information about the company includes the name, address, and taxpayer identification number. Required information about beneficial owners and company applicants includes full legal name, date of birth, address, and passport or driver’s license number, with a photocopy of such document.
The timeframe for reporting this information to FinCEN is different depending on when the company was created:
- For companies created before January 1, 2024, this information must be submitted to FinCEN on or before December 31, 2024.
- For companies created after January 1, 2024, but before January 1, 2025, this information must be submitted to FinCEN within ninety (90) days of the creation of the company.
- For companies created after January 1, 2025, this information must be submitted to FinCEN within thirty (30) days of the creation of the company.
There is no annual or quarterly reporting requirement under the CTA, but companies are required to file an amendment with FinCEN within thirty (30) days after any changes to previously reported information. All reporting will be done through FinCEN’s Beneficial Ownership Secure System (“BOSS”), an online network that has not yet been made accessible to the public.
The broad scope of the CTA means that most companies will be required to report in compliance with the CTA. There are certain exceptions from the reporting requirements, and our firm can assist in determining whether your entity fits an exemption.
Given the novel nature of the CTA’s reporting requirements, our firm is continuing to stay up to date on the legal requirements of the CTA and to monitor and assess any changes that may come. As always, we remain committed to our clients and supporting their success.
For more information, please reach out to our firm and we can help you navigate the CTA’s reporting requirements. You can also refer to FinCEN’s Frequently Asked Questions or FinCEN’s Small Entity Compliance Guide.