What you should know about the Corporate Transparency Act!

The Corporate Transparency Act (“CTA”) went into effect January 1, 2024.  The CTA was enacted by Congress to prevent the use of anonymous shell companies for money laundering, tax evasion, and other illegal purposes.  The CTA allows the federal government to compile a database of the beneficial owners of business entities.

The CTA is a new filing requirement, in addition to state and local filings, for most corporations and limited liability companies; however, it does not apply to sole proprietorships, businesses with more than 20 full-time employees and $5 million in receipts, banks, and insurance companies.

Non-exempt entities must report information about beneficial owners who own at least 25% of the company or exercise substantial control over it.  Each beneficial owner must provide his or her name, date of birth, address, and a copy of either a U.S. passport, driver’s license, or other identification.

Additional information about the reporting requirements, including answers to questions such as “is my company required to report beneficial ownership information to FinCEN,” “who is a beneficial owner,” and “when do I need to report my company’s beneficial ownership information” is available on FinCEN’s beneficial ownership information webpage:  https://www.fincen.gov/boi.

Entities formed prior to 2024 must file by December 31, 2024.  Additionally, changes in beneficial owners or their information must be reported within 30 days.  There is no fee to file. The failure to file a beneficial owner report by the deadline may result in civil penalties of up to $500 for each day the violation continues and criminal penalties of up to two years imprisonment and a fine of up to $10,000.

While the responsibility for the required disclosures is that of the entity, Clark, Mize & Linville, Chtd. will stand ready to assist with the analysis of your entity structure to determine if your entity is considered a Reporting Company, and, if so, determining its beneficial owners.

Written by: Joshua C. Howard & Jessica Stoppel

Related Practice Areas: Business Formation and Governance