Congress passed the Corporate Transparency Act (CTA) on January 1, 2021. Compliance is supposed to have occurred by January 1, 2022. However, it’s not quite ready yet.
Here’s what we know:
According to the United States Financial Crimes Enforcement Network (FinCEN), millions of corporations, LLCs, and other business entities are formed each year that are legitimate. However, some organizations are created with the explicit intention of facilitating illegal activities or undermining our nation’s security. The new reporting is designed to help reduce these instances.
The Corporate Transparency Act requires legal entities to disclose information about their “beneficial owners.” Beneficial owners are people who actually own or control a company or persons forming them. To accomplish this task, the federal government requires that most small companies with fewer than 20 full-time employees (some exceptions* apply) will need to supply ownership information to their state on an annual basis.
If you haven’t reported yet, and are just hearing of this, please don’t worry. We’re gathering the details to assist you in this endeavor. It is not yet clear how individual companies will report under the CTA but there is some speculation that each state will undertake the administration of the data separately. The cost to report this information (according to what we are told at this point) will probably be less than $50 apiece.
As always, we will keep you apprised on your reporting obligations as more information develops and we learn more.
If you’re curious
*Exceptions are (1) Publicly traded companies that already have ownership information reported, (2) Most financial services institutions that report to other government agencies like the SEC and FDIC, (3) Companies that employ more than 20 full-time employees or have annual revenues > $5 million and have a physical presence in the United States, and (4) Non-profit entities such as churches and charities.
Corporate Transparency Act