On December 5th, a federal district court issued a nationwide preliminary injunction against the enforcement of these reporting requirements. Pursuant to the order and pending any further developments, companies are, at the time of this writing, not required to file initial or updated beneficial ownership reports. However, the court’s order is a preliminary injunction and the ultimate outcome of the litigation remains to be seen. Covered entities should continue to monitor for updates or additional guidance.
Fast Facts
The Corporate Transparency Act, part of the National Defense Authorization Act for Fiscal Year 2021, aims to combat financial crimes by requiring certain companies to disclose their beneficial owners to the Financial Crimes Enforcement Network (FinCEN). This disclosure includes information such as the names, addresses, and identification numbers of the individuals who ultimately own or control the company. By increasing transparency around beneficial ownership, the act seeks to deter illicit activities such as money laundering and terrorism financing.
Important Deadlines:
Clients impacted: ALL C Corps, LLCs, Partnerships, & S Corps must file by December 31, 2024.
Further discussion
The Corporate Transparency Act (CTA) is a significant piece of legislation aimed at combating money laundering, terrorism financing, and other illicit financial activities. It was signed into law in the United States as part of the National Defense Authorization Act (NDAA) for Fiscal Year 2021.
Here's a breakdown of key aspects of the Corporate Transparency Act:
1. Beneficial Ownership Disclosure: One of the primary objectives of the CTA is to increase transparency regarding the beneficial ownership of companies. Beneficial ownership refers to the individuals who ultimately own or control a legal entity, such as a corporation or a limited liability company (LLC). Previously, it was relatively easy to establish anonymous shell companies in the United States, which could be used for illicit purposes. The CTA requires certain companies to disclose their beneficial owners to the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of the Treasury.
2. Reporting Requirements: Under the CTA, certain companies are required to report information about their beneficial owners to FinCEN. This information typically includes the names, addresses, dates of birth, and unique identification numbers (such as a driver's license or passport number) of the beneficial owners. Companies that are subject to these reporting requirements include corporations, LLCs, and similar entities formed or registered to do business in the United States.
3. Exemptions: Not all companies are subject to the reporting requirements of the CTA. For example, publicly traded companies are generally exempt because they already disclose substantial information to regulatory authorities. Additionally, certain small businesses with a limited number of employees or a low level of annual revenue may be exempt from reporting.
4. Penalties for Non-Compliance: The CTA imposes penalties for non-compliance with its reporting requirements. Failure to report accurate and up-to-date information about beneficial owners can result in civil penalties, including fines and other enforcement actions. These penalties are intended to incentivize companies to comply with the law and provide accurate information to FinCEN.
5. Impact: The Corporate Transparency Act is expected to have a significant impact on efforts to combat financial crime in the United States. By increasing transparency around beneficial ownership, the CTA aims to make it more difficult for individuals and organizations to conceal their identities and engage in illicit activities such as money laundering, terrorism financing, tax evasion, and corruption.
Overall, the Corporate Transparency Act represents a major step forward in efforts to promote transparency and accountability in the corporate sector and to prevent the misuse of legal entities for illegal purposes.
Types of companies impacted
The Corporate Transparency Act primarily impacts certain types of companies that are considered "reporting companies" under the law. These include:
1. Corporations: Both domestic and foreign corporations that are formed or registered to do business in the United States are subject to the reporting requirements of the Corporate Transparency Act.
2. Limited Liability Companies (LLCs): Similar to corporations, domestic and foreign LLCs formed or registered to do business in the United States are also required to comply with the reporting requirements.
3. Other Similar Entities: The reporting requirements of the Corporate Transparency Act may also apply to other types of entities that are similar to corporations or LLCs and are formed or registered to do business in the United States.
It's important to note that not all companies are subject to the reporting requirements of the Corporate Transparency Act. For example, publicly traded companies are generally exempt from the act because they already disclose substantial information to regulatory authorities through other means. Additionally, certain small businesses with a limited number of employees or a low level of annual revenue may be exempt from reporting.
The specific criteria for determining which companies are subject to the reporting requirements, as well as any exemptions, are outlined in the regulations implementing the Corporate Transparency Act.
Steps To File
To file the Beneficial Ownership Information Report, visit Fincen.gov/boi
Click File a report using BOI System
Under Beneficial Ownership Information (BOI) Reporting, click “Get Started”
File Online BOIR: Click Prepare & Submit BOIR
Click I Agree
Type of Filing: Initial Report
Keep date as is
Click Next
Request to receive FinCen ID
Input LLC Legal name
Under Forms of Identification, select EIN and input the LLC’s EIN (no dash)
Country of formation is USA
Skip the Domestic Reporting section
Input the LLC Address
Under Company Applicant, input the required data for the LLC owner
You will need a photo of your Driver’s License attached as a PDF to complete the filing
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