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Corporate Transparency Act

The Corporate Transparency Act (“CTA”) was passed by Congress in January of 2021 as part of the Anti-Money Laundering Act of 2020 in the National Defense Authorization Act for Fiscal Year 2021. The CTA is intended to assist law enforcement in combatting money laundering, tax fraud, financing of terrorism, and other illicit activity through shell companies. A final rule implementing the reporting requirements was issued on September 29, 2022. The reporting requirements are to take effect on January 1, 2024. The CTA imposes reporting obligations on the following types of companies: Corporations, LLCs, or other entities formed by filing of a document with a secretary of state or similar office or registered to do business in a state or tribal jurisdiction.

The information required to be reported includes the basic identifiers for the company as well as the identifiers for the entity’s beneficial owners or the company applicants (depending on when the entity is or will be formed). Beneficial owners are individuals or entities that either (a) exercise “substantial control” over the reporting company or (b) hold a 25% or greater ownership or controlling interest in the entity. The identifiers required to be reported for either class of individuals include full legal name, date of birth, current residential address, a unique identifying number from one of the following: a U.S. passport, a government issued identification document, or if neither, a passport issued by a foreign government. An image of the identification document is also required.

Companies required to report beneficial ownership information to the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”) have different filing deadlines depending on whether the company exists or in the case of a foreign company, is registered to do business in a state or tribal jurisdiction on January 1, 2024.

These deadlines referenced above are as follows: entities formed before January 1, 2024 have until January 1, 2025 to file its initial report; entities formed on or after January 1, 2024, must file its initial report within thirty (30) days of the earlier of the date on which it receives actual notice that its creation has become effective or the date on which a secretary of state or similar office first provides public notice; and entities reporting any change to previously disclosed information must do so within thirty (30) days following the change. The CTA also expressly enumerates a laundry list of larger, more regulated entities that may be subjected to different reporting requirements and therefore may not have to file a report.

FinCEN did not enumerate in the rule whether limited liability partnerships, limited liability limited partnerships, business trusts, and most limited partnerships are required to report, however FinCEN did express that these entities are generally formed by a filing with a secretary of state or similar office so they may be expected to report as well. Of note, the CTA also includes civil and criminal penalties for violations, including a fine up to $10,000, imprisonment for up to two years, or both. FinCEN will begin accepting the beneficiary ownership information reports no sooner than January 1, 2024.

Our firm has extensive experience counseling employers/businesses and others on statutory requirements, as well as preparing and implementing applicable policies. If you have any questions related to this Legal Briefing, please contact any member of our firm at 585-730- 4773.

Corporate Transparency Act
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This Legal Briefing is intended for general informational and educational purposes only and should not be considered legal advice or counsel. The substance of this Legal Briefing is not intended to cover all legal issues or developments regarding the matter. Please consult with an attorney to ascertain how these new developments may relate to you or your business. © 2023 Law Offices of Pullano & Farrow PLLC


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