NOTE: FinCEN has not finalized reporting procedures of this new law; information below accurate as of 8/14/23.
The Corporate Transparency Act (CTA) was enacted as part of the Anti-Money Laundering Act of 2020, which was implemented to buckle down on illegal activity such as corruption, money laundering, terrorist financing and tax fraud. The Act will require certain entities to file a report with the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN). This report identifies the entities’ beneficial owners and includes identifying information about those individuals. The Act further authorizes FinCEN to disclose this information to certain government authorities and to financial institutions for select purposes. Failure to comply may result in significant penalties, so it is critical for business owners to understand whether the CTA applies to them and the scope of reporting under the CTA.
Businesses with less than 21 full-time employees and less than $5M in annual gross receipts or sales.
A business is defined as a legal entity, which includes any corporation, limited liability company, family limited partnership, limited partnership and limited liability limited partnership that you own, or have any direct or indirect control of, regardless of whether the legal entity is currently active or conducting business of any kind. One who controls a legal entity under the current Act includes for corporations, shareholders, directors and officers, for limited liability companies, members and managers (and if the limited liability company has officers such as CEO, CFO, COO, President, Vice President, Secretary and/or Treasurer), and for limited partnerships, family limited partnerships, limited partnerships and limited liability limited partnerships, general and limited partners (and if the limited liability company has officers such as CEO, CFO, COO, President, Vice President, Secretary and/or Treasurer).
Note that family limited liability companies created for estate planning purposes holding securities and passive assets are included in the definition above.
For the above-mentioned entities, the CTA will require additional identifying information about any beneficial owners.
A beneficial owner is defined as any individual who fulfill at least one of the following:
exercises substantial control over the entity
controls 25% or more of the ownership interests of the entity
who receives substantial economic benefits from the assets of the entity
Trustees of Trusts that own companies are considered beneficial owners.
The information that will be required for each owner includes:
Full legal name
Date of birth
Current residential address
Copy of photo ID, such as a Driver’s License
The effective date of the CTA is January 1, 2024. Companies existing prior to this date will have one year (until December 31, 2024) to submit the required information to FinCEN. On August 1, a bipartisan bill was proposed to extend the reporting deadline for existing companies until December 31, 2025 and extend the deadline to 60 days for entities formed after the effective date.
FinCEN is currently working on publishing a Small Entity Compliance Guide, which will describe each provision of the new rule as well as establishing a contact center to assist in filing reports. K+H will also provide you with options of how we can assist in submitting this information for you and help keep you compliant.
For more information regarding the new law and its requirements, please visit the FinCEN website: https://www.fincen.gov/boi
For any other initial questions or concerns, you can reach us at CTA@kelleherholland.com or 847-881-3467.