Corporate Transparency Act Update
by Hunter Taylor
December 13, 2023
We are writing to remind you about some regulatory changes which are going into effect in the coming weeks which may impact your business. As you may have heard or seen in prior updates, The Corporate Transparency Act (CTA) has been enacted and it is crucial for all business owners to be aware of its applicability and considerations.
Overview of the Corporate Transparency Act
The Corporate Transparency Act, passed as part of the National Defense Authorization Act for Fiscal Year 2021, aims to enhance corporate transparency and combat illicit activities such as money laundering and “terrorism financing.” In short, the CTA requires certain businesses to disclose their beneficial ownership information to the Financial Crimes Enforcement Network (FinCEN) in an effort to hedge against those illicit activities.
The CTA applies to “reporting companies”, which include corporations, limited liability companies (LLCs), and similar entities that do not qualify for one of the available exemptions. If your business falls within the scope of a reporting company, you will need to comply with the disclosure requirements outlined in the Act.
Reporting companies are required to submit information about their beneficial owners to FinCEN. Beneficial owners are individuals who exercise “substantial control” over a reporting company, or directly or indirectly own or control 25% or more of the ownership interests in the company.
It is important to be aware of the compliance deadlines. Entities formed after January 1, 2024 must comply at the time of formation, while existing entities have a grace period to comply which is currently set at one (1) year. This is a key consideration in corporate governance planning for the next year, and may favor filings being made before January 1, 2024 for certain structures.
Information to be Disclosed
The information to be disclosed includes the names, dates of birth, addresses, and unique identification numbers of the beneficial owners; each of which must be submitted using FinCEN’s online portal (which, as of today, has not yet been released for access). There are significant penalties for lack of disclosure, so it is essential to take proactive steps to meet these new regulatory requirements.
Our corporate law team is available to assist you in understanding and complying with the Corporate Transparency Act. Again, if you are considering forming a new entity in the near future, you may want to do so before the turn of the new year. If you have any questions regarding the CTA and its new regulatory requirements, please do not hesitate to reach out to our office.
This update should not be construed as legal advice or a legal opinion on any specific facts or circumstances. Further, this update shall not create a lawyer-client relationship. The contents are intended for general informational purposes only, and you are urged to consult an attorney regarding the contents hereof.