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Corporate Transparency Act

The Corporate Transparency Act (the “CTA”) was enacted by Congress as part of its on-going effort to combat terrorism, organized crime, and money-laundering.  The United States is joining other nations that have already adopted similar reporting requirements in an effort to make it more difficult to hide criminal activity from law enforcement by creating shell companies.  The CTA requires certain entities (called “reporting companies”) to report information about the companies themselves, their beneficial owners (more on who these persons are below), and company applicants (the persons who signed the formation documents for the entity).  It is vital to understand that the law is quite broad and will apply to a vast number of companies created for legitimate purposes, with severe penalties for not accurately and timely reporting required information to the government through an online reporting system created by Financial Crimes Enforcement Network (“FinCEN”), a department of the United States Treasury.  The reporting requirements for entities existing as of December 31, 2023 are delayed until January 1, 2025; however, entities formed on or after January 1, 2024 will be subject to these rules and required to report under a tighter deadline.  Under a revised rule issued November 29, 2023, FinCEN extended the deadline for entities created in 2024 ONLY to no later than 90 days after the entity is formed, instead of the original 30 days.  For new entities created on or after January 1, 2025, the reporting deadline will be no later than 30 days after the entity is formed.  Even with an extension in 2024, this may be a very short time to gather all the required information, so it will be important for those who are forming entities beginning in 2024 to start gathering the required information well before the entity is formed.  While we note that several professional organizations have petitioned Congress to delay implementation of the CTA, no one should defer preparation for the CTA, banking on a delay being granted.  

You can take steps to ensure that, to the extent that you may be a beneficial owner, or a person responsible for making sure a reporting company is in compliance with this new law, you have all the information necessary for timely compliance.  For example:

  • If you have ownership interests in any company that may be subject to the CTA reporting requirements, inquire with the company what steps they will be taking to ensure timely compliance with the law.

  • If you are the trustee of a trust that holds an interest in a reporting company, and if the trust may hold a 25% interest in or control over the reporting company, you should consider having an advisor review the trust instrument to determine who may hold powers that could make them a beneficial owner and begin to gather the necessary information.

  • If you believe that you may be a beneficial owner of one or more reporting companies, whether you are considered a beneficial owner because of direct ownership or control of the company or via an indirect interest, you may wish to apply to FinCEN for a FinCEN Identifier.

  • It is uncertain what should be reported if a reporting company has no Tax Identification number (such as a single member LLC) because it uses an individual’s social security number.  Because of this uncertainty, it may make sense to apply for a Tax ID now.

We are not engaging in any CTA compliance work at this time.  Please make sure that CTA requirements are addressed in a timely manner by you, your accountant or another service provider.


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