Once in a while, an attorney hears both sides of a sad story. Recently, our…
Next year, small business owners, LLC owners, and anyone who owns/runs a similar entity will have a new filing that they will have to make and update. The Corporate Transparency Act (“CTA”) will require corporations, LLCs, other similar U.S. entities that are created by state filings, and non-U.S. corporations, LLCs, and other similar organizations to report their basic information and identify their beneficial owners and for organizations created after January 1, 2024, the people who file or are responsible for filing the formation documents. The Treasury Department has defined beneficial owners to include “any individual who, directly or indirectly, either (1) exercises substantial control over a reporting company, or (2) owns or controls at least 25 percent of the ownership interests of a reporting company.”
The law is designed to assist in preventing money laundering and other illicit financial activity. There are 23 types of entities that are currently exempted from reporting, but they are mainly entities that are already reporting this information and more to a government agency like very large companies, banks, and other organizations that have high reporting requirements to the state or federal government. It is slightly unclear how the reporting requirement will impact some professional and trade partnerships and organizations. The exemptions could be expanded by the Treasury Department in the future. The filing under the CTA will have to be made with the Financial Crimes Enforcement Network. All companies or organizations required to report existing prior to 2024 will have one year from January 1, 2024, to file their initial reports. Companies or organizations created after January 1, 2024, will have 30 days after receiving notice of their creation to file their initial reports. After an initial report is filed, companies and organizations will have 30 days to report changes to their information after any changes have occurred. The same 30-day time period applies when inaccurate information is discovered by the filer. The penalty for failing to comply with the CTA’s reporting rule could be quite substantial (civil penalty of $500 per day the violation continues up to $10,000 or even up to 2 years in jail).
If you have any concerns about how this law and rule could impact your company or organization, the attorneys at Hannah Sheridan & Cochran are able to provide assistance.