Important Reporting Requirements Effective January 1, 2024

In an effort to promote transparency and combat financial crimes, the United States government has introduced the Corporate Transparency Act (CTA). Effective January 1, 2024, this legislation will significantly impact Limited Liability Companies (LLCs) and Corporations across the nation. In this blog post, we’ll explore the key provisions of the Corporate Transparency Act and its reporting requirements that will shape the corporate landscape starting next year.

1. Background

The Corporate Transparency Act was signed into law on January 1, 2021, as part of the National Defense Authorization Act for Fiscal Year 2021. Its primary aim is to combat money laundering, terrorism financing, and other illicit activities facilitated by anonymous shell companies. The act’s core focus is on enhancing transparency in corporate ownership and control.

2. Reporting Requirements

Effective January 1, 2024, the CTA introduces several reporting requirements that businesses must comply with:

a. Beneficial Ownership Reporting

One of the central pillars of the CTA is the requirement for certain businesses to report their beneficial ownership information to the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of the Treasury. Beneficial ownership information includes the names, addresses, and other identifying details of individuals who own or control the business.

This requirement primarily applies to “reporting companies,” which are defined as corporations, limited liability companies (LLCs), and similar entities that are formed or registered in the United States. Reporting companies will need to identify and report their beneficial owners, which are individuals who directly or indirectly hold a 25% or more ownership stake in the company.

b. Reporting Changes in Beneficial Ownership

Reporting companies must also provide updates to FinCEN within one year of any changes in their beneficial ownership. This ensures that the government has access to accurate and up-to-date information about the individuals who control these entities.

3. What Information Needs to Be Reported?

Companies subject to the Corporate Transparency Act will need to report the following information:

(1) Full legal name of the business.

(2) Any trade names used by the business.

(3) The business address.

(4) Information about beneficial owners, including their names, dates of birth, addresses, and a photo of their driver’s license or other valid identification.

4. Privacy Considerations

While transparency and accountability are crucial, the CTA also addresses privacy concerns. It stipulates that beneficial ownership information collected by FinCEN will not be made publicly accessible. Access will be restricted to authorized government agencies and financial institutions, such as banks, to aid in their due diligence and anti-money laundering efforts.

5. Exemptions

Not all businesses will be subject to the CTA’s reporting requirements. Some entities are exempt, including publicly traded companies, certain financial institutions, and businesses with more than 20 full-time employees and over $5 million in gross receipts or sales. Nonprofit organizations, governmental entities, and small businesses that meet specific criteria are also exempt.

6. Penalties for Non-Compliance

The CTA enforces strict penalties for non-compliance with reporting requirements. Failure to report or submitting false information can result in criminal and civil penalties, including steep fines and imprisonment. These penalties underscore the seriousness with which the government views corporate transparency.

7. How to Report

Starting on January 1, 2024, FinCEN will have an online system in place for reporting this information. Guidance on how to report can be found on the official FinCEN website at www.fincen.gov/boi. Make sure to familiarize yourself with the reporting process and deadlines well in advance to ensure smooth compliance. 

Take the stress out of Corporate Transparency Act reporting requirements and let Cooper & Huber, LLP handle the reporting for you. Contact us today to secure your business’s compliance.

This blog post is written by an attorney at Cooper & Huber, LLP.  It is for general educational purposes only and is not intended as legal advice or a solicitation for services. We hope it helps you or empowers you to seek next steps in your legal matters. Cooper & Huber attorneys handle an array of personal and business law matters throughout California.  You can contact us at www.chcounsel.com or 213.423.1163.

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