New Required Reporting - The Corporate Transparency Act
Beginning January 1, 2024, all existing and new businesses will be required to file a new report. The Corporate Transparency Act aims to reduce financial crimes, and thereby mandates businesses to disclose their beneficial owners to the Financial Crimes Enforcement Network (FinCEN). Companies created in 2024 and beyond will also need to disclose their company applicants.
Beneficial Ownership Disclosure
One of the primary features of the CTA is the requirement for businesses, including corporations, LLCs, and other similar entities, to report information about their beneficial owners. Beneficial owners are individuals who, directly or indirectly, either (1) exercise substantial control over a reporting company (i.e., President, Treasurer, or similar position), or (2) own or control at least 25 percent of the ownership interests of a
reporting company.
Company Applicants
Company Applicants are individuals who directly file the document that creates the entity. This individual physically or electronically files the document with the Secretary of State. Company Applicants can also be the individual who is primarily responsible for directing or controlling the filing of the creation or first registration document.
Reporting Requirements
Reporting entities are required to provide details such as full legal names, dates of birth, addresses, and unique identification numbers of the beneficial owners. The unique identification number can be the ID found on either your Driver’s license or US Passport.
Companies established before January 1, 2024, are required to submit their report by December 31, 2024. Companies established on or after January 1, 2024, are required to submit their report within 30 days of
creation.
If there is any change to the reporting company or any of its beneficial owner information, an updated report must be provided within 30 days of the change. This includes a simple change in address for any owner!
(As a side note, it’s always important to let PPG Partners and your attorney know if you move or if your name or your business name changes. Not only will this report need to be filed, but there are also other forms that need to be filed and various documents that need to be updated with address and name changes.)
There is no requirement to report a reporting company’s termination or dissolution.
Penalty for not complying
The willful failure to report complete or updated beneficial ownership information to FinCEN, or the willful provision of or attempt to provide false or fraudulent beneficial ownership information, may result in civil or criminal penalties, including civil penalties of up to $500 for each day that the violation continues, or criminal penalties including imprisonment for up to two years and/or a fine of up to $10,000. Senior officers of an
entity that fails to file a required BOI report may be held accountable for that failure.
More Behind The Corporate Transparency Act (from fincen.gov)
The Corporate Transparency Act (CTA) represents a significant milestone in the realm of corporate governance and accountability. The rule will enhance the ability of the Financial Crimes Enforcement Network (FinCEN) and other agencies to protect U.S. national security and the U.S. financial system from illicit use and provide essential information to national security, intelligence, and law enforcement agencies; state, local, and Tribal officials; and financial institutions to help prevent drug traffickers, fraudsters, corrupt actors such as oligarchs, and proliferators from laundering or hiding money and other assets in the United States.
Illicit actors frequently use corporate structures such as shell and front companies to obfuscate their identities and launder their ill-gotten gains through the United States. Not only do such acts undermine U.S. national security, they also threaten U.S. economic prosperity: shell and front companies can shield beneficial owners’ identities and allow criminals to illegally access and transact in the U.S. economy, while disadvantaging small U.S. businesses who are playing by the rules. This rule will strengthen the integrity of the U.S. financial system by making it harder for illicit actors to use shell companies to launder their money or hide assets.
