Congress loves to spice things up by giving us new laws–bonus points if it includes new reporting requirements! The new Corporate Transparency Act (“CTA”) took effect on 1/1/2024, is going to make the coming year quite spicy for business owners!
The CTA imposes new reporting requirements for businesses – including those existing before 1/1/2024, as well as those created thereafter. The required reports must be filed with the Financial Crimes Enforcement Network (FinCEN) and must give information about each company’s Beneficial Owners and Company Applicants. This information will not be public record, but will be accessible by law enforcement and taxing authorities.
Here is a breakdown of what you need to know if you are a business owner. Be aware, even if you only own a LLC to hold a rental property, you are probably a business owner for purposes of the CTA.
WHO IS IMPACTED:
• Each Entity filed with the Secretary of State for creation (LLCs, corporations) and foreign entities registered to do business here (with exemptions for regulated industries, large operating companies, non-profits, inactive entities)
• Each Beneficial Owner- a person who owns 25%+ of an entity or exercises “substantial control” over an entity (even if not an owner)
• Each Company Applicant- a person who filed the entity creation documents with the Secretary of State (*Company Applicant report not required for entities created before 1/1/2024)
WHAT MUST BE REPORTED:
• Business information (name, principal place of business, EIN)
• Beneficial Owner & Company Applicant information (name, birth date, residential address, passport/license number and copy)
WHEN IS THE REPORT DUE:
• For an Entity created before 1/1/2024, a report must be filed by 1/1/2025
• For an Entity created during 2024, a report must be filed within 90 days of Entity creation
• For an Entity created after 2024, a report must be filed within 30 days of Entity creation
In addition to the initial reports, the Reporting Company will be responsible for filing updates when any of the reported information changes (within 30 days after the change). If a company does not comply with the CTA, harsh penalties may apply – including a fine of up to $500 per day until compliant, plus criminal fines and jail time.
We’ll provide more details on the CTA to our clients in the coming weeks, but for now – be aware that, if you own a business of any kind, this new rule will likely impact you.