The Corporate Transparency Act (CTA) is effective on January 1 and requires "Reporting Companies" to disclose specific information to the US Treasury Department’s Financial Crimes Enforcement Network (FinCEN). Below is a snapshot of the CTA and why it’s important to understand how it can impact your business.
Who are Reporting Companies? They include domestic or foreign corporations, limited liability companies, and similar entities registered with a US State or Tribal Office. Most trusts do not fall under this definition.
What must Reporting Companies do? They must submit reports about themselves, their Beneficial Owners (those with significant control or ownership), and their Company Applicants (those responsible for filing registration).
Are there any exemptions? Yes, including large operating companies, banks, registered investment advisors, tax-exempt entities, subsidiaries of exempt entities and inactive entities. Family Offices are not specifically exempted.
What about trusts? While most trusts are not Reporting Companies, they can be Beneficial Owners. The reporting process involves looking at certain individuals associated with the trust, including beneficiaries, grantors and trustees.
What information must be reported? Reporting Companies must provide FinCEN with details about themselves and their Beneficial Owners and Company Applicants. This includes full legal names, trade names, principal places of business, jurisdiction of formation, unique taxpayer ID numbers, dates of birth, current addresses, unique ID numbers, and images of ID documents. Any changes must be promptly reported.
When should the information be reported? For companies formed before 2024, all Beneficial Ownership Information must be submitted by January 1, 2025. For those formed in 2024, the information must be submitted within 90 calendar days of formation. For entities formed from 2025 onwards, the information must be submitted within 30 calendar days of formation.
What's the bottom line? Determining reportable entities, Beneficial Owners, and required information is a complex process that requires a thorough review of the CTA, the company structure and the individuals involved. This can become more complex when a trust is a Beneficial Owner.
For a more detailed analysis of the CTA, read “Action Required: Corporate Transparency Act Reporting Is Here.”
And don’t miss Katten’s “2023 Year-End Estate Planning Advisory.”
