The passage of the Corporate Transparency Act (CTA) in 2021 is changing how businesses operate. The CTA creates new obligations for corporations, limited liability companies (LLCs) and limited liability partnerships (LLPs). Specifically, organizations will now need to file a report with the Financial Crimes Enforcement Network (FinCEN).
Existing organizations will need to file a report identifying those with an interest in the company with FinCEN by January 1st, 2025. Businesses started after January 1, 2024, will need to file an initial report within 30 days of the business’s establishment. LLCs, LLPs and corporations will need to put together reports identifying beneficial owners. Organizations will need to complete specific tasks to comply with these new requirements.
Disclosing owners and applicants
Organizations will need to identify by name every individual who has at least a 25% ownership interest in the organization. Companies established after the law goes into effect will also need to provide information about the company applicants. An applicant is the party who files paperwork with state and federal agencies to create the organization. Additionally, anyone who manages or controls another party’s filing will also need to have their name included in the report.
The report will also need to include the birth date of each owner or company applicant, as well as their Social Security number or other relevant identifying number, as well as the jurisdiction that provided them with that number. The report will need to include an image of each owner’s and applicant’s identifying documents, such as state-issued identification cards, for each owner or applicant.
Beneficial ownership reports also need to include details identifying the company, including any alternate names it uses beyond the officially registered name for the organization. The company’s address, the jurisdiction where people created the company and the taxpayer identification number for the company are also all necessary inclusions in the report.
The company will also need to indicate within the report whether this is an initial report, a correction or a follow-up to a prior report. Any corrections to reports will need to occur within 30 days of the changes to the company’s circumstances. Given all of the potentially sensitive details included in the beneficial ownership information reports, FinCEN will provide a secure filing system on the website.
Currently, the reporting system is still under development, but organizations will likely want to move forward with preparing the initial reports before the reporting system is accessible. Those who have helped form a company or who hold an ownership interest in an organization will need to ensure that they properly abide by the requirements imposed under the CTA.
Gathering appropriate information as soon as possible will make it easier for businesses to remain compliant when the law goes fully into effect. Seeking legal guidance proactively can be beneficial in this regard.