The Corporate Transparency Act went into effect January 1, 2024
The Corporate Transparency Act (CTA) went into effect on January 1, 2024, and anyone involved in setting up a corporate entity needs to know how this new law will impact their business operations and how to avoid stiff penalties.
The CTA is designed to bring the United States into compliance with international anti-money laundering laws and to strengthen national security and the integrity of the U.S. Financial system by deterring crimes committed using shell entities, including human trafficking, drug trafficking, hiding or laundering money, tax evasion, and financial fraud, by lifting the curtain on owners of corporations, limited liability companies, and other similar entities.
Who is impacted?
Any entity that is a “Reporting Company” must file a report for each of the entity’s “company applicants” and “beneficial owners”. While there are limited exemptions, “Reporting Companies” include:
- Any domestic corporation, limited liability company or similar entity that is created by filing a document with a secretary of state or similar office of a state or Indian tribe; or
- Any foreign entity formed under the laws of a foreign country registered to do business in the U.S. by the filing of a document with a secretary of state or similar office of a state or Indian tribe.
Generally, unless an entity falls within one of the specific exemptions, it is a Reporting Company. We can help you determine whether your company is a Reporting Company.
A “beneficial owner” is any individual who:
- Directly or indirectly exercises substantial control over such reporting company; or
- Owns or controls at least 25% of the ownership interests of the reporting company.
A “company applicant” is an individual that in 2024 or after:
- Directly files a document to form a U.S. entity (including the individual, who is primarily responsible for directing or controlling the filing if more than one individual is involved in the filing of the document, including but not limited to c-suite executives, general counsel, senior officers, and the entity’s legal counsel); or
- Registers a foreign entity to do business in the U.S.
Deadlines
Reporting Companies formed before January 1, 2024, have until January 1, 2025, to file the report.
Reporting Companies formed on or after January 1, 2024, have 90 days from the date the entity is formed to file the beneficial owner report, and Reporting Companies formed in 2025 and thereafter have 30 days from formation date to file the required reports.
Updates to filed reports are required within 30 calendar days of any changes in the information provided by the related Reporting Company or of the Reporting Company becoming aware of mistakes or inaccuracies in a report.
Penalties for Failing to Report
Violators of the CTA can be subjected to civil and criminal penalty actions of up to $500 per day for each penalty, criminal fines of up to $10,000, and up to two years imprisonment per violation. Violators include any person who willfully directs or causes a Reporting Company not to report, any person who willfully fails to report while in substantial control of a Reporting Company, or any person who willfully files or causes a Reporting Company to file false information.
To learn more about the CTA and the impacts it may have on your business operations; for help on determining whether your company is a reporting company, identifying beneficial owners and/or company applicants; and for help with understanding the steps you’ll need to take to file a report, please contact Zaki Robbins at zaki.robbins@moyewhite.com or Yasaman Hosseini at yasaman.hosseini@moyewhite.com.
This information is provided as general information only and does not constitute legal advice or an attorney client relationship. If legal advice is needed, please contact your attorney.