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ALERT: Corporate Transparency Act Effective January 1, 2024

Updated: Jan 10

ALERT

CORPORATE TRANSPARENCY ACT EFFECTIVE JANUARY 1, 2024

                                                                                                                                    

The Corporate Transparency Act (CTA) is a federal law that became effective on January 1, 2024.  Pursuant to the CTA, domestic and foreign business entities who are registered with any Secretary of State (Reporting Company) may be required to report information about their Beneficial Owners (individuals who ultimately own or control the company) with the U.S. Department of Treasury’s Financial Crimes and Enforcement Network (FinCEN).  It is extremely important that you review the reporting requirements to avoid significant penalties.  You can find additional information related to the CTA here, or by visiting www.fincen.gov/boi.


Your company may be a Reporting Company if: 1) it is a corporation, LLC, or other registered company created in the United States by filing a document with a Secretary of State or other similar office under the law of a state or Indian tribe; or 2) a foreign company that has registered to do business in any U.S. state or Indian Tribe by a similar filing.  There are twenty-three types of entities that are exempt from reporting requirements, including publicly traded companies, non-profits and certain large operating companies (one that employs more than 20 employees on a full-time basis, generates more than $5 million in gross receipts on its federal income tax return and has an operating presence at a physical office in the United States).  Most family-owned or small business entities will NOT be exempt from reporting.

 

Reporting Requirements – If your company is a Reporting Company, it will be required to submit information about the Company itself, the Beneficial Owners of the Reporting Company and the Company Applicant (person signing the formation documents for the entity).

 

Information Required – Company.  Each Reporting Company must report 1) legal name, 2) trade name, 3) business address, 4) jurisdiction information, and 5) U.S taxpayer identification number.

 

Who is a Beneficial Owner? A Beneficial Owner is an individual who directly or indirectly 1) exercises substantial control over the Reporting Company (even if they do not own an ownership interest) OR 2) owns or controls at least 25% of the ownership interests of the Reporting Company.  Note that the estate planning you may have in place may directly impact the individuals that would be considered Beneficial Owners.  For example, trustees, beneficiaries, trust protectors, and other power holders may be considered to have indirect control or indirect ownership of the Reporting Company. 

 

Information Required – Beneficial Owners and Company Applicants.  If your company is a Reporting Company, then it will be required to report the following information about its Beneficial Owners and the Company Applicant:  1) Individual’s name; 2) Date of Birth; 3) Residential Address; and 4) Identifying number from an acceptable identification document such as a passport or U.S. Driver’s License (along with an accompanying image of the document).  For individual Beneficial Owners that are deemed Beneficial Owners of multiple entities, a FinCEN ID may be established, so that this private information can be uploaded once. 

 

Penalties and Deadlines

 

Penalties.  Failure to report or false reporting may lead to civil or criminal penalties for the Reporting Company and/or for certain individuals associated with the Reporting Company, including a $500/day fine for each day that a violation continues or is not remedied, and a fine of up to $10,000 and 2 years imprisonment.

 

Deadlines and Key Dates

 

Existing Entities: entities that were in existence prior to January 1, 2024 have until January 1, 2025 to submit their Beneficial Ownership Information Report. 

 

New Entities:  Reporting Companies created or registered on or after January 1, 2024 must file the Beneficial Ownership Information Report to FinCEN 1) if created or registered during 2024, within 90 calendar days, or 2) if created or registered after 2024, within 30 calendar days.

 

Errors or Changes on a Filed Report.  If a report was filed with inaccurate information, or if there is a change to a Beneficial Owner (which includes certain indirect individuals that may be impacted by your estate planning), a corrected or updated report must be filed within 30 days of becoming aware of, or having reason to know of, inaccurate information previously filed. 

 

It is the responsibility of each Reporting Company to comply with the filing requirements for the CTA.  If you need assistance, please contact our office and we can help guide or direct you.  Although we may have been legal counsel for your entities or your estate, or although we may be the registered agent for your entity, the responsibility, liability, and penalties associated with timely filing fall to each Reporting Company. 

 

   



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