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Corporate Transparency Act Blog Series (Part 1) – The Corporate Transparency Act’s Implications

September 12, 2023 Business & Tax Blog Corporate

On January 1, 2024, the Corporate Transparency Act (the “CTA”) will take effect and may impact the disclosure requirements for you and your business.

The CTA is an anti-money laundering law that aims to force bad actors to reveal ownership of various business structures. Congress states that bad actors seek to conceal their ownership of corporations, LLCs, or similar entities in the United States to facilitate money laundering, financing of terrorism, tax fraud, and other illegal acts. As a result, “federal legislation providing for the collection of beneficial ownership information is needed to protect national interests and better enable efforts to counter those illegal acts.”

There are various exemptions as to which types of businesses do not have to report to FinCEN, but for those that do, the deadline for reporting will be here soon. Some of the common exemptions include but are not limited to:

  1. Banks
  2. Governmental Authorities
  3. Insurance Companies
  4. Public Utilities

Businesses already in existence prior to January 1, 2024, must file the required reports to FinCEN no later than January 1, 2025. Businesses formed on or after January 1, 2024, must file the required reports to FinCEN within 30 calendar days of entity creation.

FinCEN reporting will require businesses to disclose information regarding:

  • businesses’ beneficial owners;
  • businesses themselves; and
  • business applicants who made the filings to register the businesses.

Businesses must report their full legal names, any trade name of “doing business as” name, current address, jurisdiction of formation, and their federal taxpayer ID number. Beneficial owners must report their full legal name, date of birth, residential address, and a passport number, driver’s license number, or another form of accepted identification. Disclosures will not be shared with the general public, nor can disclosures be requested through the Freedom of Information Act. For each day a company does not timely file a report with FinCEN, the company may suffer up to a $500.00 fine. There is also the possibility of criminal penalties of either $10,000.00 or up to two years in prison when a company willfully fails to complete the information, or willfully provides false information.

Please refer to Part 2 of this blog series entitled; “Who Qualifies as a Beneficial Owner under the Corporate Transparency Act?” for an explanation as to who in your business may qualify as a beneficial owner.

Contact Williams Parker today to gain valuable advice on how to best protect your business and ensure reporting compliance.