How to Comply with The Corporate Transparency Act

The Corporate Transparency Act (“CTA”) has ushered in significant changes in the corporate landscape, affecting a wide range of stakeholders, including business owners, investors, shareholders, limited liability company members, officers and directors, and legal professionals like corporate lawyers and business lawyers. In this business lawyer blog post, we’ll delve into the CTA’s impact on these key players and offer insights to ensure compliance and share some resources that that were recently released by US. Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”).

Who is Required to File Reports under the Corporate Transparency Act?

The CTA requires reporting of beneficial ownership of a “reporting company.”  A reporting company is defined as:

A domestic reporting company is any entity that is a corporation, a limited liability company, or otherwise created by the filing of a document with a secretary of state or similar office,

or

A foreign reporting company is any entity formed under the law of a foreign country and registered to do business in any U.S. state by the filing of a document with a secretary of state or similar office.

Which Entities Are Exempt From Filing?

While the CTA applies to many entities, some exemptions exist. It’s important to understand these to determine whether your organization is subject to reporting requirements. A comprehensive list of the exempt entities is available in FinCen’s FAQs. Aside from these specifically identified entities, a company may be also exempt if it fits into one of the following two general categories:

is owned or controlled by an exempt entity (with some exceptions)

1) has more than 20 full-time employees in the United States, 2) reported more than $5,000,000 in gross receipts or sales (including the receipts or sales of subsidiaries and other entities through which such entity operates) on its previous year U.S. tax returns; and  3) operates at a physical office within the U.S.

Am I a Beneficial Owner Under the Corporate Transparency Act?

The CTA requires reporting companies to report all beneficial owners who:

• Hold at least 25% ownership interest in the reporting company,

OR

• Exercise substantial control over the reporting company.

Reporting as a business owner involves providing personal identifying information, including your name, date of birth, address, and a unique identification number, such as a driver’s license or passport number. You’ll also need to specify the nature and extent of your ownership interest as well.  

When do I have to Comply With the Corporate Transparency Act?

A reporting company created or registered before January 1, 2024 …	A reporting company created or registered on or after January 1, 2024…
…will have until January 1, 2025 to file its initial beneficial ownership information report.	…will have 30 days to file its initial beneficial ownership information report from the time the company receives actual notice that its creation or registration is effective, or after a secretary of state or similar office first provides public notice of its creation or registration, whichever is earlier.

How Do I Report Under the Corporate Transparency Act?

Reporting under the CTA will be done electronically through a secure filing system that will be available on FinCEN’s website. Although the specific form is not yet available, detailed instructions will be provided. The electronic filing system is designed to streamline the reporting process and ensure the secure submission of beneficial ownership information.

FinCEN will only begin accepting beneficial ownership information reports on January 1, 2024. You will not be required to pay a fee to report under the Corporate Transparency Act.

Seeking Legal Guidance to Comply Under the Corporate Transparency Act

Navigating the complexities of the Corporate Transparency Act can be daunting especially as the rules for its compliance are still being drafted. Corporate lawyers and business attorneys can provide invaluable assistance to determine if your company is exempt and to guide you through the reporting process.  A New York Business Lawyer / New Jersey Business Lawyer can:

• Review corporate structures and governance documents (like bylaws, shareholders agreements, operating agreements, etc.) to identify beneficial owners.
• Determine whether the company is exempt from reporting.
• Prepare and submit the required beneficial ownership reports.
• Provide ongoing legal counsel to ensure continued compliance with evolving enforcement of the Corporate Transparency Act.

Conclusion

The Corporate Transparency Act is a game-changer for business owners, investors, shareholder, limited liability members, officers and directors, and legal professionals like corporate attorneys and business attorneys.

Please consult the FinCEN Beneficial Ownership Information Page for an abundance of reference materials (including FinCEN’s Small Entity Compliance Guide, FAQs, and videos) and reach out to a qualified New York corporate lawyer New Jersey corporate lawyer Russo Law LLC for personalized support.

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