Starting January 1, 2024, a significant change will affect many businesses. The Corporate Transparency Act mandates corporations, limited liability companies (LLCs), limited partnerships, and other entities such as non-U.S. companies that register to do business in the U.S. through a filing with a Secretary of State to file a report with the Financial Crimes Enforcement Network (FinCEN). This report will disclose detailed information about the entity’s “beneficial owners.” Most entities must file these reports by January 1, 2025. However, new entities formed in 2024 must file the report within 90 days of the entity’s formation.

Key Points to Note:

  1. Purpose: This federal initiative aims to combat money laundering and tax evasion by shedding light on the actual individuals behind corporate entities.
  2. Reporting Requirements: The information required includes the legal name, residential address, date of birth, and an identification number (from a passport, driver’s license, or state ID) of the beneficial owners; the entity will also have to provide an image of any of these forms of documentation.
  3. Penalties for Non-Compliance: Failing to report or update this information can lead to substantial fines, including fine of up to $500 per day until the violation is remedied, or if criminal charges are brought, fines of up to $10,000 and/or even imprisonment.
  4. Exceptions: Certain entities, such as those already regulated by federal or state governments, and “large operating companies” meeting specific criteria (at-least 20 FT employees, more than $5 million in gross revenue, and a physical U.S. office) are exempt.
  5. Legal Guidance Recommended: Given the complexity and potential penalties, legal consultation is advised to ensure compliance.
  6. Beneficial Owner Definition: A beneficial owner generally refers to individuals who either directly or indirectly own more than 25% of the entity’s ownership interests or exercise substantial control over the reporting company (even if they don’t actually have an ownership interest).
  7. Phase-In Period: New entities must comply starting January 1, 2024, while existing entities have until January 1, 2025 to file.

Action Required:

  1. Review your entity’s structure and determine if you fall under this new requirement.
  2. Prepare to compile and report the necessary information by the deadlines.

Further Assistance:

  1. For detailed information, refer to FinCEN’s FAQs: FinCEN Beneficial Ownership FAQs.
  2. Contact us for guidance and support in navigating these changes.

We are committed to keeping you informed and assisting you in maintaining compliance with these new regulations. Please don’t hesitate to reach out with any concerns or questions.