Corporate Transparency Act – What You Need to Know

The law aims to improve transparency of ultimate beneficial owners of entities formed or registered to do business in the United States and addresses issues such as money laundering, terrorist financing, and other illicit activities. Additionally, the CTA was created to prevent the misuse of anonymous shell companies for illegal activities by increasing transparency and making it more difficult for criminals to conceal their identities.

Beneficial ownership refers to individuals who ultimately own or control a company, either directly or indirectly, and either exercise “substantial control” over the company or own and control at least 25% of the company’s ownership interests. By having access to the “beneficial ownership” information, law enforcement agencies and financial institutions will be better equipped to investigate and track illicit financial activities.

FILING REPORT REQUIREMENTS AND EXEMPTIONS

The requirement to submit reports extends to both domestic and foreign reporting companies. However, it’s important to note that the CTA exempts certain entities from the beneficial ownership information reporting requirement. Some of the exempted entities include:

Regulated financial services companies, including banks, credit unions, depository institution holding companies, registered securities broker-dealers, registered investment companies and investment advisers, venture capital fund advisers, and pooled investment vehicles that are operated or advised by the foregoing, Insurance companies, Tax-exempt entities, Inactive entities that existed before January 1, 2020, that are not engaged in active business, are not owned by a foreign person, have not had a change in ownership in the last 12 months, have not sent or received funds greater than $1,000 in the last 12 months, and do not hold any assets, Entities that employ more than 20 full-time employees in the U.S., have an operating presence at a physical office in the U.S., and demonstrate more than $5 million in gross receipts or sales on their federal income tax return (excluding receipt/sales from sources outside the U.S.)

FILING REPORT DEADLINE

New entities created in 2024 will have 90 days to file a report.

Entities already in existence on January 1, 2024 have until January 1, 2025 to file a report.

Entities that are created or registered in 2025 and beyond will have 30 days to file their reports.

Failure to comply with the CTA’s reporting requirements, which require a certification that the reported information is “true, correct, and complete,” may result in civil and criminal consequences. This includes a potential civil fine of up to $500 per day (capped at $10,000) and the possibility of imprisonment for a maximum of two years.

Updates to reports must be made within 30 days after there is a change to previously reported information or a reporting company becomes aware that previously reported information is inaccurate.

This article is intended solely to inform our clients regarding the reporting requirements on the CTA.

Rudler will not be preparing or assisting with the filing of these reports. There is very little guidance on who may provide assistance, and assisting with this reporting could be considered a corporate disclosure matter that may fall under the practice of law.

The information presented is meant to be general in nature and should not be applied to your specific facts and circumstances without consultation with competent legal counsel or a specialized adviser.

Additional information can be found regarding the Beneficial Ownership Information (BOI) reporting at the U.S. Government website fincen.gov/boi. or by contacting the Office of the Inspector General.