As of January 1, 2024 (the effective date), entities formed through a filing with their Secretary of State or a similar office must file reports with the Department of Treasury’s Financial Crimes Enforcement Network (FinCEN) under the new Corporate Transparency Act (the Act). This will apply to U.S. companies formed in any state and companies formed under the laws of a foreign country authorized to do business in any state.
Existing companies formed before January 1, 2024 will have until January 1, 2025 to file their initial reports, but entities formed on or after the effective date will have only 30 days from formation to file their reports. When filing a report, a company must include information on the company itself and any of its beneficial owners. A beneficial owner is an individual who, directly or indirectly, either exercises substantial control over the company or owns or controls 25% or more of the company’s ownership interest.
In addition, an individual who files an application (called a company applicant) to form a reporting company or to register a foreign company must also provide certain information to FinCEN. Company applicants can be the owner of the reporting company itself or the attorney or the paralegal/assistant who filed the formation documents on behalf of the reporting company.
Although there are 23 categories of entities that will be exempt from the reporting requirements, a large majority of U.S. companies and foreign companies doing business in the U.S. will not qualify for any of those exemptions. There will be both civil and criminal liabilities for non-compliance, and companies and attorneys alike must become knowledgeable about the Act.
