On Jan. 1, 2024, the Corporate Transparency Act (CTA) went into effect. To help curb financial crimes such as money laundering and tax fraud, this federal law aims to increase transparency in the ownership of certain business entities.
The CTA requires business entities, including corporations and LLCs, operating within the United States to submit information about the entity, its owners, and who controls the entity by filing a beneficial ownership information report with the Financial Crimes Enforcement Network (FinCEN). There are multiple exemptions to these filings that all legal entities will need to examine to determine their obligation to report.
FinCEN’s reporting portal went live on Jan. 1, 2024.
What to Report + Timelines
If you created or registered your company before Jan. 1, 2024, you must file your initial beneficial ownership information report by Jan. 1, 2025. Companies created or registered on or after Jan. 1, 2024, and before Jan. 1, 2025, will have 90 calendar days to file. Companies created or registered after Jan. 1, 2025, will have 30 calendar days.
Reports must include your business entity’s:
- Legal name and any trade name or “doing business as”
- Address of the principal place of business
- State in which it was formed or registered
- Employer identification number/taxpayer identification number
The report must also include the following information about each beneficial owner:
- Legal name, birthdate, and home street address
- Identifying number from an approved document, such as a driver’s license or US passport
- Copy of the document associated with the identifying number
Companies will also have 30 days to report any changes in beneficial ownership or changes in information about a beneficial owner.
The Corporate Transparency Act defines a beneficial owner as an individual who “exercises substantial control” over the entity and/or who owns or controls at least a 25% ownership interest in the entity.
What You Can Do
While FinCEN says it will keep the reporting process as simple as possible, it may take some time to ensure the portal is running smoothly and error-free. We recommend consulting with your lawyer to determine the best time to report as well as which entities and individuals to include in the report—as mentioned, there are several exemptions.
Finally, beware of scams. FinCEN was notified of recent attempts to solicit information from individuals and entities who may be subject to reporting requirements under the CTA. FinCEN says it does not send unsolicited requests and cautions individuals not to respond to fraudulent messages.
