by Kevin Fitzgibbons, Fitzgibbons Law
The Corporate Transparency Act (CTA) is part of a federal effort to combat illegal money laundering and other financial crimes.
On Jan. 1, 2024, most U.S. companies will be required to file first-time paperwork with the Treasury Department’s Financial Crimes Enforcement Network (FinCEN). Failure to file can carry stiff fines and jail time.
Here are general answers to FAQs.
Does my business have to file a report? Almost certainly. Entities required to report include LLCs, most corporations, most partnerships and certain types of trusts.
Who is exempt? Sole proprietorships and large companies in regulated industries (banks, insurance companies, SEC-registered companies, utilities, many tax-exempt organizations, etc.).
What has to be reported? The required company information is relatively simple, such as its legal name, trade names or DBAs, physical address, jurisdiction of formation (e.g., Arizona), and (EIN).
The reporting company must also provide specific information about (a) the “company applicant” (the individual who filed the application to form the legal entity) and (b) each of the reporting company’s “beneficial owners.”
For each individual, the report must include their name, date of birth, home or business address, and a unique identifying number from an acceptable identification document, along with an image of the document.
A “beneficial owner” is someone who exercises “substantial control” over the entity; owns 25% or more of the equity interests of a corporation or LLC; or receives substantial economic benefits from the entity’s assets.
When do we have to file? If your entity existed before Jan. 1, you have 12 months to file your initial report. If it is created on or after Jan. 1, you have 30 days from its inception date.
How do we file? You must use the FinCEN online portal, which will not be available until early 2024.
What if we don’t file? Failure to file on time can be costly. “Willful” violations can carry civil penalties ($500 for each day past a deadline) and, in some cases, criminal liability (up to $10,000 in fines and two years in prison).
How often do we have to file? While filing your initial report isn’t too difficult, every time something in your report changes, you have to file another report. Any change must be reported to FinCEN within 30 days of the change, and any error must be corrected within 14 days of filing.
