The new Corporate Transparency Act (“CTA”) was recently enacted with the goal of combatting money laundering, tax fraud, and other illicit activities by increasing transparency into entity structures and ownership. The CTA went into effect on January 1, 2024, and will apply to most corporations, limited liability companies, and other business entities.
To accomplish the CTA’s goal of increased entity transparency, the Financial Crimes Enforcement Network (FinCEN) (which is a bureau of the U.S. Department of Treasury) will require most business entities to report identifying information about the entity and its “beneficial owners.” A “beneficial owner” is broadly defined as any individual who, directly or indirectly, either (i) owns or controls 25% or more of the ownership interests in a reporting company, or (ii) exercises “substantial control” over a reporting company. For each of a company’s beneficial owners and each company applicant, the company will need to provide: (i) the individual’s legal name, (ii) the individual’s birthdate, (iii) the individual’s address (in most cases, a home address), and (iv) an identifying number from a driver’s license, passport, or other approved document, as well as an image of the relevant document. Reporting will be done online through a secure filing system known as BOSS (Beneficial Ownership Secure System), accessed via FinCEN’s website at https://www.fincen.gov/, and is supposed to be available beginning on January 1, 2024. The deadlines applicable to reporting companies are as follows:
If a company was formed before January 1, 2024, the company may be required to file a FinCEN report by January 1, 2025, providing information about the company and its beneficial owners.
If a company is formed on or after January 1, 2024, the company may be required to file a FinCEN report within 90 days of formation if the company is formed in 2024 (or within 30 days of formation if the company is formed after 2024), providing information about the company, the company applicant(s), and the company’s beneficial owners.
After January 1, 2024, once a company has submitted its FinCEN report, the company is required to report (1) certain changes in ownership or control within 30 days of the change, and (2) corrections to previously filed reports within 30 days of becoming aware of, or having reason to know of, an inaccuracy.
The CTA does provide a reporting exemption for 23 types of entities, most significantly including tax-exempt entities and “large operating companies” (defined as a company with more than 20 employees in the U.S., annual gross receipts or sales over $5 million, and a physical operating presence in the U.S.).
Please note that this notice is for informational purposes only and is not intended to be legal advice. Every entity’s structure is different, and the CTA may apply differently. If you would like our assistance with any aspects of the CTA or its reporting requirements, please contact your attorney at ThompsonMcMullan, and we are happy to assist
