On January 1, 2021, a new federal law called the Corporate Transparency Act (CTA) became law. The CTA requires almost all LLCs, PLLCs, for profit corporations, limited partnerships and other entities created by filing a document with a state to file a report with the Financial Crimes Enforcement Network (“FinCEN”) of the U.S. Treasury that discloses information about the entity, its beneficial owners and the person who filed the entity’s formation document with its formation state.
Warning: If you are an owner of a U.S. company you need to read the article on our Corporate Transparency Act website to learn if your company must file a report with FinCen to avoid a $500/day non-filing penalty. Companies created before January 1, 2024, must file their FinCEN beneficial owner report before January 1, 2025. Companies created after January 1, 2024, will have 30 days after receiving notice of their creation to file their reports.
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How the CTA Affects Your Entity
Here is a brief summary of the CTA:
- All reporting companies must report to the U.S. Treasury’s Financial Crimes Enforcement Net (FinCEN) certain required information about the companies’ beneficial owners and its applicant. See the definition of reporting company and the list of companies that are not reporting companies.
- All reporting companies formed before January 1, 2024, must report the required information to FinCEN before January 1, 2025, but FinCEN has not created a system for filing the reports.
- All reporting companies formed after December 31, 2023, must report the required information to FinCEN not later than thirty days after receiving notice of their creation.
- Almost ALL existing companies and companies formed in the future are or will be reporting companies that must report the required information to FinCEN. See the definition of required information.
- A beneficial owner is an individual who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise (i) exercises substantial control over the entity; or (ii) owns or controls not less than 25 percent of the ownership interests of the entity. See the definition of beneficial owner.
- The following is the required information about each beneficial owner and applicant that the reporting company must report to FinCEN: (i) full legal name, (ii) date of birth, (iii) current, as of the date on which the report is delivered to FinCEN, residential or business street address; and (iv) the unique identifying number from the beneficial owner’s or applicant’s acceptable identification document or the beneficial owner’s or applicant’s FinCEN identifier number. See the definition of required information.
- A reporting company that violates the CTA shall be liable to the United States for a civil penalty of not more than $500 for each day that the violation continues or has not been remedied; and may be fined not more than $10,000, imprisoned for not more than 2 years, or both.
- If you have a reporting company you must read my article called “What to Do Now.” This article explains the actions reporting companies need to take now to prepare for filing their FinCEN beneficial owner report before January 1, 2025.
- To stay up to date on the CTA and its regulations get a free subscription to our CTA newsletter.
To learn more about the Corporate Transparency Act see my CTA website and subscribe to our free CTA newsletter.
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