learn about the Corporate Transparency Act
The Corporate Transparency Act (CTA) broadly covers any corporation, limited liability company or “similar entity” that was created by filing a document with a Secretary of State, Tribal, or similar office. Existing firms will have filed Federal Income Tax returns demonstrating less than $5,000,000 in gross receipts or sales in the aggregate. Newly formed firms will have to automatically apply. The company will have less than 21 employees. There will be exceptions to this law. See FAQ below that lists the current proposed exceptions.
The penalties for non-compliance, such as failing to report or providing false information, include fines of up to $10,000 and a prison term of up to two (2) years for each offense!
The Corporate Transparency Act defines “company applicant” as an individual who files a document that creates a domestic reporting company or who first registers a foreign reporting company with a Secretary of State, Tribal office, or similar office in the United States. The proposed law also includes any individual who directs or controls the filing of such a document by another person.
FinCEN will retain this information and hold it in a confidential and secure database, only releasing information in specifically prescribed circumstances:
It means most small and mid-size entities throughout the United States must begin reporting to FinCen starting 2022. FinCen estimates this new law will affect over 25 million entities.
Financial Crimes Enforcement Network, Bureau of the United States Department of the Treasury collected comments until Feb 7, 2022 to finalize the new law. The final rule for beneficial ownership reporting is effective January 1, 2024. Companies which were established on or before that date will be given a year to file. Sign up for our Newsletter, and CTAfiler.com will inform you of any future updates.
Companies subject to the CTA will be required to begin reporting to FinCEN in 2022. Check back here at CTAfiler.com for the first day you can submit your report.
The proposed Corporate Transparency Act law will require:
* Companies formed or registered after the effective date of the regulations must submit the required report to FinCEN with 14 days of formation or registration,
* Companies formed or registered prior to the effective date of the regulations, must submit the required report to FinCEN no later than one year after the effective date of the regulations,
* After the initial report is filed with FinCEN, companies must update any changes in the reported information within 30 days on which the change occurred.
The Corporate Transparency Act defines “beneficial owner” as an individual who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise (i) exercises substantial control over the entity; or (ii) owns or controls not less than 25% percent of the ownership interests of the entity
Information Required for each “Beneficial Owner” and “Company Applicant”
The Corporate Transparency Act is not clear on how Partnerships and Trusts will be considered. Check back with CTAfiler.com for more information as it becomes available.
The purpose of the Transparency Act is to prevent potential wrongdoers from exploiting United States corporations and limited liability companies for criminal gain and to assist law enforcement in detecting, preventing, and punishing terrorism, money laundering, and other misconduct involving United States corporations and limited liability companies, and for certain other purposes.
The Transparency Act information is not available to the public. As an important distinction from the ultimate beneficial owner registers and rules of other non-US jurisdictions, the current rules of the Transparency Act provide that the beneficial ownership information submitted to FinCEN would not be available to the general public. FinCEN has limited use of the information it receives.