The Corporate Transparency Act is a new federal law that will impact the owners or principles involved in almost all limited liability companies (LLCs), corporations (both C & S), limited partnerships (LPs) and other closely held entities. The penalties are significant, both civil, up to $500 per day, and criminal, up to $10,000 and imprisonment for up to two years, for failing to comply.
This is a significant step in enhancing transparency in corporate structures and preventing the misuse of anonymous shell companies for illegal purposes. By requiring the disclosure of beneficial ownership information, the law aims to strengthen the ability of law enforcement agencies to investigate and prosecute financial crimes, ultimately promoting greater integrity in the corporate sector.
Most if not all businesses are subject to the new law. Most important is the reporting obligation beyond the initial report, is an on-going requisite due to any changes, for example, change of address, new management etc.
The Financial Crimes Enforcement Network (FinCEN) is the agency responsible for enforcing the CTA. FinCEN has the authority to examine and verify the reported information, conduct investigations, and take appropriate enforcement actions against non-compliant entities. They can also coordinate with other law enforcement agencies to share information and support investigations related to financial crimes.
Companies will also have to file for “beneficial owners” defined as: individuals who own 25% or more of the company, either directly or indirectly. This could include the company's equity or voting rights. Additionally, those who exercise substantial control or influence over the company's management or decision-making processes are also included.
Reporting is required for entities created on or after 1-1-24 and will have to report within 30 days of creation of the entity. This provides very little time to respond so one must be very diligent.
Entities that were in existence on January 1, 2024, must initially report by 1-1-2025. This may seem a long way out but due to the significant information required, starting early to gather this info may be critical to make the deadline.
Additionally, any changes must be reported within 30 days of the change. Systems must be put in place as this could be very easy to miss. Some of these changes could be as simple as a name change, date of birth, address, or identifying number. As of now there are no extensions to the 30-day time frame.
If you have ANY interest in a closely held entity or exert control of such entity, which may include any officer, director, manager, chief financial officer, or investment trustee, you may be subject to these requirements and responsible for filing with FinCEN.
If you would like to discuss this further, please contact me at 818-342-9950 or email me at
Barry.boscoe@brightonadvisory.com You may also use my calendar link below to set a time that works best for you.
https://calendly.com/brighton-advisory/30-phone-call?month=2022-08