Introduction
In a rapidly evolving regulatory landscape, staying informed about the latest changes is crucial for businesses. The new Corporate Transparency Act is no exception. This article aims to guide you through the essentials, ensuring a smooth understanding of what’s required and how to comply.
What is the Corporate Transparency Act
The Corporate Transparency Act (CTA) went into effect January 1, 2024 and requires that businesses submit beneficial ownership information to the U. S. Department of Treasury’s Financial Crimes Enforcement Network. The goal of the CTA is to address illicit activities such as money laundering and tax evasion.
What is Beneficial Ownership Information
Understanding beneficial ownership is the cornerstone of financial transparency. In essence, it involves identifying and disclosing the individuals who ultimately own or control a legal entity.
Who Needs to Comply
Limited Liability Companies, Corporations and any entities that are created by filing with the Secretary of State. These are referred to as “Reporting Companies”. It’s essential for these entities to familiarize themselves with the obligations to ensure compliance.
Non-Profit companies are Reporting Companies but there are three exemptions for tax-exempt entities. Specifically 501(c) organizations, certain political organizations and certain non-exempt charitable or split interest trusts are exempt from the CTA reporting requirements.
What Information Is Reported
Reporting Companies must submit information about the company and its beneficial owners. Beneficial owners are individuals who have substantial control over the company or who own or control at least 25% of its interest.
Reporting Companies must provide: 1) full entity name; 2) trade names or DBA names; 3) address; 4) jurisdiction of formation; and 5) EIN.
Each beneficial owner must provide the following information: 1) legal name; 2) birthdate; 3) personal address; 4) drivers license number, passport number or other identification number from an approved document; and 5) an image of the approved document showing the identification number.
Key Deadlines
- Existing companies (those formed before January 1, 2024 have until January 1, 2025 to file their initial report.
- Companies formed during 2024 have 90 calendar days after receiving notice of the company’s formation to file their initial report.
- Companies created on or after January 1, 2025 will have 30 calendar days after receiving notice of the company’s formation to file their initial report.
Frequency of Reporting
The CTA does not require annual reports. Once the initial report is filed you only need to update or correct information if it changes. Changes must be reported on an updated report within 30 days of the change.
Consequences of Non-Compliance
Failure to comply with the CTA can lead to financial and criminal penalties. It’s in the best interest of businesses to prioritize compliance and avoid unnecessary risks.
Understanding and complying with the CTA and Beneficial Ownership Information Reporting Requirements is important for all businesses. If you have questions about if your business needs to comply with the CTA schedule a free 15 minute call here and let our Olney business attorneys help you.