Q:  What is the Corporate Transparency Act?

A: The Corporate Transparency Act (the “CTA”) was passed by Congress in 2021 with the goal of curtailing the use of LLCs, limited partnerships, and other business entities as vehicles for money laundering by gathering information about the beneficial owners of such entities.  While it was passed in 2021, it is due to take effect beginning January 1, 2024.  It is anticipated that this Act will affect a very large number of companies and failure to comply carries with it strict penalties, such as a $500/day fine for failure to register.  A brief summary of the CTA is below.

Q:  Do I need to File Anything for my Company?

A: All Reporting Companies must file beneficial ownership information with the Department of Treasury’s Financial Crimes Enforcement Network (FinCEN).  A “Reporting Company” is any company that was organized by filing a Certificate of Organization, Articles of Incorporation or a Certificate of Limited Partnership, etc. with a governmental entity including the Pennsylvania Department of State.  Therefore, if you are an LLC, an LP or a corporation, you are a Reporting Company.

Q: Are There any Corporate Transparency Act Exceptions?

A: Twenty-three (23) different types of companies are however exempt from registration.  The three most popular will likely be large companies, inactive companies and tax exempt companies.

• In order to qualify as a large company there are several requirements, each of which must be satisfied.  However only companies with more than 20 employees in the United States and with gross receipts over $5,000,000 are eligible for this exemption.
• To qualify as an inactive company the company must have been formed prior to January 1, 2020, and for the past 12 months (i) not be engaged in any active business; (ii) not had any ownership changes; and (iii) not received funds in an amount greater than $1,000.  Other requirements must also be satisfied in order to qualify for this exemption.
• Tax exempt entities are essentially only those entities that have received tax exempt status from the IRS such as a 501(c)(3) charity.

Q: What Information Must be Disclosed Under The Corporate Transparency Act?

A: A business’s transparency under the CTA requires that it disclose basic information about itself such as its name, any D/B/As, its address, tax ID number, and state of organization, etc.

The company must also disclose the identifying information of any Beneficial Owner of the company.  A person becomes a Beneficial Owner by either (a) directly or indirectly owning more than 25% of the company or (b) directly or indirectly exerting substantial control over the company.  The question of who exerts substantial control over the company is a complicated one and one that should be determined by talking with an attorney.

Once you determine who the Beneficial Owners of the company are, you must disclose each Beneficial Owner’s name, date of birth, address and provide a copy of a government issued identification.  For those individuals who may own interests in several companies and not want to provide and subsequently update this documentation for each of their companies, FinCEN has established a process whereby an individual can apply for a FinCEN Identifier.  The person would provide the above information once and be given an identification number that can be submitted with each company for which they are a Beneficial Owner.

Q: What are the Corporate Transparency Act’s filing deadlines and where do I file?

A: Filing can be done on FinCEN’s website. (https://fincen.gov/boi).

Filing deadlines are determined by the date your company was formed.

• For companies that were formed prior to January 1, 2024, registration under the CTA must be complete by January 1, 2025.
• For companies that are formed during 2024, registration must be complete within 90 days of formation.
• For companies that are formed in 2025 or afterwards, registration must be complete within 30 days of the company being formed.

Once registration is complete, if any of the reported information changes, a Reporting Company or Beneficial Owner has 30 days to update their registration

Q: Where can I get more information?

A: Determining whether or not you or your company qualifies for an exception for reporting from the CTA can be a fact specific determination.  FinCEN has provided more information in their Small Entity Compliance Guide.

If you have any questions about whether you or your company has to register under the CTA, the business lawyers at Blakinger Thomas are here to assist you.