Corporate Transparency Act Client Release

The burdensome new beneficial owner reporting requirements under The Corporate Transparency Act (the “CTA”) take effect January 1, 2024, which is rapidly approaching. BrownWinick clients involved with a business entity in any respect (whether as an owner, director, officer, manager, member, employee, or otherwise) are encouraged to reach out to their BrownWinick attorney to put a CTA compliance plan in place. 

If you have not requested your BrownWinick attorney to assist you with CTA compliance, it will be assumed that you understand your reporting obligations and will handle your own reporting. 

If you missed Brennan Block’s blog regarding the CTA generally and Ingrid Johnson’s blog regarding the CTA’s applicability to business entities held in trusts, here is a short non-exclusive summary of a few things you must know about the CTA: 

Who should be worried about the CTA? 

If you own (directly or indirectly) 25% or more of any business entity (such as an LLC, LLP or corporation), or have substantial control over a business entity (as a director, officer, manager, member, employee or otherwise), you are likely a “Beneficial Owner” of the business entity subject to CTA reporting requirements. 

If the CTA applies to you, what are you required to report and to whom? 

You must report to FinCen your full legal name, date of birth, current address and unique identification number from an acceptable identification document (i.e., your state issued ID), as well as an image/copy/scan of the identification document (i.e., your state issued ID) containing your reported identification number. 

How will the CTA change the way you do business? 

On top of reporting required information to FinCen within 30 days of formation of a business entity, business entities must keep information reported to FinCen current throughout the entity’s existence. If the parties that own 25% or more of, or exercise substantial control over, a business entity change then the business entity needs to report updated information to FinCen within 30 days of the change. Existing business entities (as of January 1, 2024) must comply with the CTA by January 1, 2025. (Note that FinCen has issued a proposed rulemaking changing the 30-day filing period for business entities newly formed in 2024 to 90 days after formation, but such proposal has yet to be formally adopted.) 

Are there any exemptions from the CTA? 

Limited types of business entities are exempt from the CTA’s reporting requirements. These exempt entities are already subject to government regulation (e.g., banks, insurance companies, investment advisors and companies, credit unions, public utilities, etc.). Large private companies, defined generally as companies with 20 or more employees, > $5 million gross annual receipts, and a U.S. office, are also exempt. 

What are the penalties for noncompliance? 

There are civil penalties of up to $500 per day a violation continues as well as possible imprisonment of up to 2 years for any person who willfully (1) provides, or attempts to provide, false or fraudulent beneficial ownership information or (2) fails to report complete or updated beneficial ownership information to FinCEN. 

How can BrownWinick assist you? 

If requested, BrownWinick is able to assist business entities and their owners with CTA compliance, including applicability determinations as well as collection and submission of information required to be reported to FinCen. Any questions? Contact Ellen Hames at 515-242-2423 or Brennan Block at 515-242-2441. 

This is for general informative purposes only, is not a comprehensive statement of the CTA and should not be construed or relied upon as legal advice. BrownWinick will not be responsible for CTA reporting for any entity unless an engagement is confirmed in writing by BrownWinick.