The Corporate Transparency Act (CTA) is set to go into effect in January 2024. The Act, which aims primarily to enhance national security, and also to combat tax fraud and money laundering, will likely impact many privately held corporations, business trusts, and limited partnerships.
Who Needs to File?
The CTA requires “reporting companies” to report certain beneficial ownership information to the Financial Crimes Enforcement Network (FinCEN) within the United States Department of Treasury.
Reporting companies may be either foreign or domestic.
- Domestic “reporting companies” are corporations, LLPs, LLCs, or any other entity created by filing a formation document with the secretary of state or similar office;
- Foreign “reporting companies” are corporations, LLPs, LLCs, or any other entity formed under the law of a foreign country and registered to do business in the United States.
Though the definition of “reporting corporation" seems broad, there are a number of exceptions. These include: public companies, financial institutions, nonprofit organizations, and insurance companies operating within the United States.
What Has to Be Reported?
Reporting companies are required to submit the following information to FinCEN for each beneficial owner:
- Full name;
- Date of birth;
- Address; and
- Unique identifying number from an acceptable document and a photo of that document.
Where available, a FinCEN identifier may be submitted instead of the required information.
The CTA defines a beneficial owner as an individual who directly or indirectly:
- Exercises substantial control over the entity; or
- Owns or controls at least 25% of the ownership interests of the entity.
The CTA will allow state and federal law enforcement agencies to have greater access to ownership information and be better able to share this information with international agencies. Clients should consider which entities are “reporting companies” under the CTA’s definition, and whether they are covered by one of the exceptions. Clients may want to update their policies and procedures to collect beneficial owners’ information for any of these “reporting companies” and to be able to track any updates to such owners’ information.
The attorneys at Airdo Werwas, LLC are available to consult with you on matters involving the Corporate Transparency Act. If you have any questions or concerns about these issues, or any other matter related to the CTA, please do not hesitate to contact Amna Abid at aabid@airdowerwas.com, or (312) 506-4459.