Is Your Business Prepared for the Reporting Requirements Under the Corporate Transparency Act?

After years of discussion, the Corporate Transparency Act (CTA) officially goes into effect on January 1, 2024 – just a few months from this publication. Businesses need to prepare for the Beneficial Ownership Information reporting aspect of the law and the deadlines associated with it.

This is a move we anticipated and addressed in an article last June. Now that the implementation is just months away, we want to update you on what’s in the law and how it impacts your business.

What is the Corporate Transparency Act?

The CTA is an element of the Anti-Money Laundering Act of 2020. The U.S. government is taking aim at shell companies and organizations that exist exclusively to avoid taxes and funnel money toward shady practices and individuals.

Most businesses in the U.S. are subject to the Beneficial Ownership Information reporting detailed within the CTA. Non-exempt entities will be required to file identifying information to the Financial Crimes Enforcement Network (FinCEN) under the U.S. Treasury. Required information from beneficial owners includes:

  • Full legal name
  • Date of birth
  • Current residential or business street address
  • Unique identifying number from an acceptable identification document

Beneficial owners are defined as any individual “who exercises substantial control or owns or controls at least 25% of a reporting company’s ownership interests.” If an entity has more than one beneficial owner then all qualifying individuals must provide this information.

Exceptions

Exempt entities include any entity that already reports this information as part of another act or due to federal regulations. Outside of that, exceptions to the reporting requirements are for “large operating companies” defined by having each of the following:

  • More than 20 full-time employees in the U.S.
  • More than $5 million in gross receipts or sales from sources inside the U.S.
  • An operating presence at a physical office in the U.S.

Reporting Deadlines

This new rule goes into effect on January 1, 2024, but businesses do not need to report this information immediately on this date. Entities that exist prior to that date have until January 1, 2025, to file the necessary beneficial ownership information to FinCEN. Entities that are established after January 1, 2024, however, have just 30 days to file the necessary beneficial ownership information.

If there is an error in the information submitted or an update needs to be made, all non-exempt entities have 30 days from the date of the error or change to file updated information with FinCEN.

Is Your Company Ready?

The team at CLARK.LAW has had our eye on this since the discussion began several years ago. This impacts a significant number of our clients, and we are working to inform businesses about the reporting requirements within the Corporate Transparency Act. If you and your business need help navigating these new reporting requirements, contact our law office to ensure you’re in compliance before the upcoming deadlines.

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