By Laurie E. Ohall, Florida Board-certified Elder Law Attorney
Do you know who really owns a company? It is not always as clear as you might think, and now there is a new federal law which will change that. The new law is known as the Corporate Transparency Act (CTA), and it went into effect on January 1. The CTA was enacted to combat financial crimes and promote transparency in corporate structures. Under this act, certain reporting obligations have been imposed on corporations and limited liability companies (LLCs), including those formed prior to its enactment.
If you are a beneficial owner of a corporation or LLC, you may very likely have a duty to report your personal information to the federal government. There are several key points you need to consider.
Reporting Requirement:
The CTA requires certain corporations and LLCs to report specific information about their beneficial owners to the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of the Treasury. Beneficial owners are individuals who directly or indirectly own or control 25 percent or more of the ownership interests in the entity, as well as anyone who manages the company.
When we talk about beneficial ownership, we’re talking about the real people who ultimately own or control a company, even if their names aren’t on official documents. Sometimes, companies can be owned by other companies or by individuals who prefer to stay hidden behind layers of ownership. The purpose of the reporting is to help prevent things like money laundering, terrorism financing and other illegal activities that can hide behind shell companies.
Exemptions from Reporting:
Certain entities are exempted and do not have to report. These include banks, credit unions, SEC-reporting companies, insurance companies and public accounting firms. Inactive entities are also exempt.
Deadline for Reporting:
If your corporation/LLC was formed before January 1, 2024, you must comply with the reporting requirements under the CTA by January 1, 2025. Companies established between January 1, 2024, and January 1, 2025, must file the initial report within 90 calendar days of receiving notice of their creation or registration. Companies created on or after January 1, 2025, must file the initial report within 30 calendar days of receiving notice of their creation or registration. Failure to do so will result in penalties and enforcement actions.
Additionally, companies must file updated reports after the initial report if any information about the company or beneficial owner changes.
Information to Report:
The information to be reported to FinCEN includes the full legal name, the date of birth, the residential or business address and a unique identifying number (such as a driver’s license or passport number) for each beneficial owner. Additionally, you will need to provide a statement disclosing the nature and extent of the beneficial ownership interests held by each individual.
Authorized Representative:
You may designate an individual or entity, such as your registered agent or attorney, to submit the required information on your behalf. However, ultimate responsibility for compliance rests with the corporation/LLC and its owners.
Penalties for Noncompliance:
Failure to comply with the reporting requirements of the Corporate Transparency Act may result in significant civil and criminal penalties, including fines and imprisonment. The act mandates a $500-per-day fine for individuals who do not comply with the act by the designated deadline.
Some people might worry about privacy or security when it comes to sharing this information. But the law includes measures to protect sensitive information and only allows authorized government agencies to access it for specific purposes.
To learn more about your responsibilities under this new Federal law, you can go to https://fincen.gov/, click on the “Resources” tab, and then click on “Beneficial Ownership Information Reporting.” Don’t delay — you may have less time than you think.
