Here’s What You Need to Know
Key Highlights
- Beginning Jan. 1, 2024, many domestic and foreign entities must report their beneficial owners and company applicants (defined below, under “What Information Must Be Disclosed?”) to the Financial Crimes Enforcement Network (FinCEN).
- Entities in existence before Jan. 1, 2024, will have until Jan. 1, 2025, to file an initial report. Entities formed on or after Jan. 1, 2024, but before Janu 1, 2025, will have 90 days after formation to file. Entities that are formed on or after Jan. 1, 2025, will have 30 days after formation to file.
- There are 23 different exemptions that would relieve an entity from the filing requirements, but these are mostly targeted at large businesses and heavily regulated industries.
- Significant civil and criminal penalties can be imposed for non-compliance, willfully failing to report, or knowingly providing inaccurate information.
An Overview of the Corporate Transparency Act (CTA)
Enacted on January 1, 2021, the CTA aims to strengthen anti-money laundering efforts by requiring entities that are formed or registered to do business in the United States to report their beneficial owners and company applicants. Entities that do not meet an exemption will have to file an initial report with FinCEN. Subsequent updated reports will also be required if the entity’s reporting individuals have a change to previously reported information.
Who Is Required to Report?
There are two types of entities required to report:
Domestic reporting entities, which include corporations, limited liability companies, and any other entity created by the filing of a document with a secretary of state.
Foreign reporting entities, which include corporations, limited liability companies, and any other entity formed under the law of a foreign country that has registered to do business in the United States by the filing of a document with a secretary of state.
There are also 23 types of entities that are exempt from the reporting requirements. These include tax-exempt entities, inactive entities, and large operating companies.
To qualify as a large operating company, an entity must meet all of the following conditions:
- The entity employs more than 20 full-time employees in the U.S.
- The entity has an operating presence at a physical office in the U.S.
- The entity filed a federal income tax or information return in the U.S. for the previous year showing more than $5,000,000 in gross receipts or sales.
What Information is Disclosed?
Every non-exempt reporting entity must disclose its beneficial owners and company applicants.
Beneficial Owners are defined as an individual that owns or controls at least 25% of the ownership interest of the entity, either directly or indirectly, or an individual that exercises substantial control over the entity (e.g., any senior officer).
Company Applicants are defined as the individual who directly files the document to create or register the reporting company and, if applicable, the individual who is primarily responsible for directing or controlling such filing.
Reporting companies must also disclose:
- Full legal name of the company
- Any trade names or DBA names
- The address of the company
- State or jurisdiction of formation
- Federal Taxpayer ID number
Beneficial owners and company applicants must disclose:
- Full legal name
- Date of birth
- Current residential street address
- Unique ID number from acceptable ID (includes passport and driver’s license)
- Photocopy of the above-mentioned ID
Are There Penalties for Non-compliance?
The willful failure to report complete information or the willful attempt to provide false or fraudulent information may result in civil or criminal penalties. The penalties are up to $500 for each day that the violation occurs or criminal penalties, including imprisonment for up to two years and/or a fine of up to $10,000. Senior officers may be held accountable for that failure.
Next Steps
FinCEN estimates that roughly 32.6 million domestic and foreign companies will have to submit a Beneficial Ownership Information Report in 2024. To ensure your organization has properly complied with the CTA’s specific reporting requirements, reach out to your 全国最大的快3平台 advisor or Anthony Licavoli.