Legal Alert: New Corporate Transparency Act to Affect Millions of Small and Medium Sized Businesses January 1, 2024
The Corporate Transparency Act (“CTA”) became effective January 1, 2024. The CTA is intended to address and guard against money laundering and other forms of illegal financing by requiring certain entities (primarily small and medium size businesses) to report “beneficial owner” information to the Financial Crimes Enforcement Network (“FinCEN”). The CTA authorizes FinCEN, a bureau of the U.S. Treasury Department, to collect, protect, and disclose this information to authorized governmental authorities and to financial institutions in certain circumstances.
The new law applies to all businesses, including corporations, limited liability companies (LLCs), and other types of companies that are created by a filing with a Secretary of State or equivalent official. There are, however, a number of exceptions. The law creates the requirement of a new report that all covered business must file.
The new report will require information about the business, its beneficial owners and, possibly, the individual filing the report. A beneficial owner is any individual who, directly or indirectly, exercises “substantial control” or owns or controls at least 25% of the company’s ownership interests. It may include owners, partners, directors, officers, and managers.
Fortunately, there is no requirement that existing businesses file this report immediately. Although the CTA became effective January 1, 2024, covered businesses already in existence as of that date do not have to file their initial reports until January 1, 2025. For new businesses formed January 1, 2024 or after that are required to report, deadlines may vary. Updates to information in the report must be filed within 30 days of the change.
Additional guidance on implementation, including the required forms and filing information, is expected in the coming weeks. We intend to follow this post up with additional compliance information as it becomes available. In the meantime, if you have any questions about the CTA, please feel free to reach out to us.