New Corporate Transparency Act (“CTA”) – Reporting Requirement – Beginning in 2024 business entities, including your LLC or corporation, have a new mandatory filing requirement to disclose the identity of the beneficial owners to the U.S. Treasury’s Department of Financial Crimes Enforcement Network (FinCEN). This applies to my law firm, my attorney friends, and our business clients. We must comply or face stiff penalties.
Information to be reported to FinCEN about beneficial owners (those in control or owning more than 25%) includes legal names, residence address, DOB, ID from a non-expired passport, driver’s license, or state identification card, and upload image of ID provided. Information to be reported to FinCEN about the entity include its full legal name, DBAs/FBNs, current address, state of formation, and EIN.
New Corporate Transparency Act – Penalties – Failure to comply is subject to a $500 per day civil penalty and criminal penalties up to $10,000 and imprisonment up to 2 years. There is no cap on the $500 per day civil penalty.
New Corporate Transparency Act – Can My Lawyer or Accountant File for Me? – Yes, your Attorney or Accountant can file your beneficial owner report for you. At Gatherwright Freeman we can file your beneficial owner report on your behalf, and we offer competitive rates.
New Corporate Transparency Act – Reporting Deadlines – New entities formed January 1, 2024 or later must file within 30 days of the entity’s formation. Existing entities formed before January 1, 2024 must file these reports before January 1, 2025.
New Corporate Transparency Act – Invasion of Your Privacy – If you think our Congressmen are invading your privacy, you’re not alone. On November 15, 2022, the National Small Business Association filed a complaint challenging the reporting requirements set forth in the CTA. The complaint alleges: (1) unconstitutional usurpation of the states’ power to regulate entity formation; (2) unconstitutional invasion of privacy and unreasonable search and seizure; (3) compelled speech contrary to the First Amendment; and (4) unconstitutional violation of due process.
While this lawsuit may eventually require the government to finetune the CTA and some of its definitions, the CTA is unlikely to go away. Banks are already supposed to collect this information, but Congress suggests the CTA will help the government monitor tax evasion and money laundering, such as those involving drugs, PPP fraud, garden variety tax fraud, and cryptocurrency, as well as terrorism and foreign policy, for example whether a Russian oligarch owns a particular asset.
