By Brooke M. Pollard, Esq.

Beginning on January 1, 2024, most companies in the United States will have to report information about their beneficial owners, i.e., the individuals who ultimately own or control the company. This article aims to delineate the key aspects of the CTA and explain how TLD Law can support your business in navigating these changes.

• What is the Corporate Transparency Act? The CTA mandates the Financial Crimes Enforcement Network (FinCEN) to create and maintain a national registry of beneficial owners of entities classified as “reporting companies.” This initiative seeks to thwart illicit activities by preventing the misuse of shell companies.
• Who is Affected? Reporting companies under the CTA include corporations, limited liability companies, and similar entities formed in the U.S. or foreign entities registered to do business in the U.S. There are exceptions, notably for entities with substantial operational presence and financial transparency in the U.S.
• What Needs to be Provided: Reporting companies must disclose each beneficial owner’s name, birth date, address, and an identifying number from an approved document (like a driver’s license or passport). Beneficial owners are individuals with substantial control over or at least a 25% equity interest in the entity.
• By When? Entities formed in 2024 must report this information within 90 days after formation, following the implementation of FinCEN’s regulations. Existing entities have until 2025 to comply. Changes in beneficial ownership must be reported within 30 days.
• Who is Obligated to Make These Reports? The obligation lies with the reporting company itself. This is not a reporting that has to be done by either the company’s CPA or attorney.
• Penalties for Failure to Provide Information: Non-compliance can lead to fines of up to $10,000 and up to two years of imprisonment. A grace period of 90 days is provided to voluntarily correct inaccurate submissions without facing these penalties.
• TLD Law’s Expertise: Understanding and adhering to the CTA’s requirements can be challenging, especially for small and mid-sized businesses. At TLD Law, we can assist you in determining if your business needs to file a report and complete the filing process for the company. Our expertise ensures compliance with the CTA, safeguarding your business against potential legal and financial repercussions. However, we will not be assisting with the report unless and until we have been engaged to do so, by the Company executing an engagement letter with TLD Law to perform these services on its behalf.

In conclusion, the CTA represents a pivotal change in the U.S.’s approach to financial transparency. While it enhances legal oversight, it also introduces new responsibilities for businesses. TLD Law is here to help navigate these complexities, ensuring that your business remains compliant and secure. Contact us today, at bpollard@tldlaw.com to discuss how to keep your business in compliance.