The Corporate Transparency Act (CTA) was enacted as part of the National Defense Authorization Act for Fiscal Year 2021. This Act introduces significant reporting requirements for limited liability companies (LLCs) and other similar entities, such as small corporations. This newsletter outlines the key actions LLCs and small corporations must take to comply with the CTA and the timelines for these actions. If you think the CTA may apply to you, we recommend you contact your LLC attorney or CPA to help you compile and file any required information and make timely reporting to the Financial Crimes Enforcement Network (FinCEN).Understanding the Corporate Transparency Act:
- The CTA mandates reporting of beneficial ownership information to FinCEN.
- A beneficial owner is defined as any individual who directly or indirectly exercises substantial control over the entity or owns at least 25% of the ownership interests.
Reporting Requirements:
- LLCs are required to provide the following details for each beneficial owner:
- Full legal name
- Date of birth
- Current residential or business street address
- Identification number from a passport, driver’s license, or other government-issued ID
- The disclosures are meant to enhance transparency and aid in the fight against financial crimes.
Deadlines for Compliance:
- Existing Entities: For LLCs existing prior to January 1, 2024, the deadline to report beneficial ownership information is January 1, 2025.
- New Entities: Entities formed on or after January 1, 2024, must provide this information at the time of their formation.
Penalties for Non-Compliance:
- Civil penalties can reach up to $500 per day for ongoing violations, with criminal fines up to $10,000.
- Willful non-compliance may lead to imprisonment for up to two years.
Action Plan:
- Timely Submission and Updates: We recommend you contact your LLC attorney or CPA to help you compile and file any required updates to FinCEN.
- Immediate Data Collection: It is strongly recommended you collect the necessary information from each beneficial owner