Under the new Corporate Transparency Act, starting January 1, 2024, corporations, limited liability companies, and other forms of entities created by filings with their state filing office are required to file information with the Department of Treasury about the company and every beneficial owner of the company. This includes U.S. companies formed under state or tribal law and companies formed under foreign law but authorized to do business in the U.S. The act aims to weed out and deter the use of shell companies in the United States for money laundering and other illegal activities. Unless a company falls into one of the exemptions listed below, then even small family businesses must report the information to the Department of Treasury’s Financial Crime Enforcement Network (FinCEN).
While this act will impact millions of businesses around the country, 23 categories of entities are exempt as they are already required to report such information to another government agency. However, if an exempt entity ceases to qualify for an exemption, it must file a report within 30 days after the date it no longer meets the criteria for an exemption. Exempt entities are as follows:
- Securities reporting issuers
- Governmental authorities
- Banks
- Credit unions
- Depository institution (bank) holding companies
- Money services businesses
- Brokers or dealers in securities
- Securities exchange or clearing agencies
- Other Exchange Act-registered entities
- Investment companies or advisors
- Venture capital fund advisors
- Insurance companies
- State-licensed insurance producers
- Commodity Exchange Act-registered entities
- Public accounting firms
- Public Utilities
- Financial market utilities
- Pooled investment vehicles
- Tax-exempt entities
- Entities assisting a tax-exempt entity
- Large operating companies (employ more than 20 full-time employees and filed federal income returns showing more than $5,000,000 in sales or gross receipts)
- Subsidiaries of certain exempt entities
- Inactive entities
Furthermore, FinCEN stated in its Final Reporting Rule dated September 29, 2022, that whether an entity falls under the CTA depends upon what kind of filing entity it is. Unless an entity fits into one of the above exemptions, then corporations, limited liability companies, limited liability partnerships, limited liability limited partnerships, business trusts, and most limited partnerships will fall under the CTA. However, sole proprietorships, certain kinds of trusts, and general partnerships would not be required to report the information since they are not formed through a filing with a state filing office.
