The Corporate Transparency Act (“CTA”) is a new federal filing requirement for many business entities that became effective on January 1, 2024. The CTA was enacted as part of the Anti-Money Laundering Act of 2020 to provide Federal and State enforcement agencies with more comprehensive information about small and shell companies to help control money laundering and terrorist financing activities. The database of information provided by the CTA Reports will not be available to the general public but will be accessible by Federal and most states’ criminal and financial law enforcement agencies.
In general, the businesses subject to the CTA reporting requirements (“Reporting Companies”) are required to report specified information about the Reporting Company and the Reporting Company’s information beneficial owners to the Financial Crimes Enforcement Network (“FinCEN”).
On March 1, 2024, a lower Alabama federal court held that the Corporate Transparency Act, which requires certain businesses to file a BOI Report with FinCEN that includes information about their beneficial owners, is unconstitutional. Importantly, this ruling DOES NOT affect the legal obligation of entities formed in California, Nevada, or Delaware (among other states) to file their BOI Report within the timeframes specified below at this time. We are monitoring the development of this and similar court actions across the nation and will continue to provide information about them to those who have indicated a desire to receive this information from us.
Businesses subject to the CTA reporting requirements (“Reporting Companies”) are those set up as a corporation, limited liability company, limited partnership, certain types of business trusts, and a few unusual other types of entities. General partnerships and proprietorships are not subject to CTA reporting requirements. As smaller businesses are the focus of the CTA, a business that meets all three of the following criteria—or, the criteria of other specific exceptions—will NOT be required to file a CTA Report:
(a) the business reported over $5 Million in gross receipts on its last filed U.S. Tax return;
(b) the business has more than 20 full-time employees in the U.S.;
(c) the business has an operating presence at a physical office in the U.S.
CTA Reports will be filed electronically with FinCEN, a division of the U.S. Treasury Department. There is no charge for filing a CTA Report or an amended CTA Report. The deadline for a Reporting Company to file its initial CTA Report is dependent on when the Reporting Company was created as shown in the following table:
| COMPLIANCE DEADLINE FOR INITIAL CTA REPORT | |
|---|---|
| Reporting Companies formed prior to January 1, 2024 | On or before January 1, 2025 |
| Reporting Companies formed in the year 2024 | Within 90 days of formation |
| Reporting Companies formed after December 31, 2024 | Within 30 days of formation |
As information in the CTA Report becomes inaccurate or out-of-date, each Reporting Company is required to file a new CTA Report within 30 days with accurate and current information.
The CTA Report must contain specific information about the Reporting Company. This information includes the full company name, any trade names or DBAs, principal address, and IRS taxpayer identification number. In addition to the Reporting Company’s information, the CTA Report must also include the specified personal information of the Reporting Company’s ownership, each referred to as a “Beneficial Owner”.
The information required to be reported for each Beneficial Owner is such individual’s full name, date of birth, residential address, and government-issued identification. An individual qualifies as a Beneficial Owner if they directly or indirectly own more than 25% of the equity of the Reporting Company or have substantial control of the Reporting Company. Individuals with substantial control may include officers, managers, directors, equity holders with preferential rights in the Reporting Company, or others with effective control over the Reporting Company. For newly-formed Reporting Companies, the specific personal information must also be provided for individuals directing the formation of the Reporting Companies.
Please note that if your company is required to file a CTA Report there are potentially severe penalties that may be assessed, including fines, civil penalties and criminal penalties. Thus, we strongly encourage you to designate a trusted person to review this letter, research and understand the CTA’s application to your company, and be prepared to file the CTA Report well prior to your company’s filing deadline.
The month of April marks four months in the realm of the new Corporate Transparency Act, signifying deadlines for companies formed this year to adhere to the 90-day window for filing their beneficial ownership reports with the Financial Crimes Enforcement Network (“FinCEN”). For companies formed in January, those deadlines are…
On Wednesday, February 21, 2024, Weintraub attorneys Jeanne Vance and Anders Bostrom presented An Overview of the Corporate Transparency Act via webinar. To watch a recording of the presentation, please view the video below.
DISCLAIMER REGARDING EDUCATIONAL CONTENT IN THIS WEBINAR: The information provided on this webinar does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available are for general informational purposes only. It is intended to provide a general overview of the Corporate Transparency Act, and is not complete or a recitation about the way that the CTA applies to any particular organization or person. Analysis under the CTA is highly fact-specific and is beyond the scope of this presentation.
Attendees should contact their Weintraub Tobin attorney to obtain advice with respect to specific applications of the CTA. No person seeing this webinar should act or refrain from acting on the basis of information in this webinar without first seeking legal advice from counsel.
