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I can skim email with the best of them, but for anyone who has a company or ever plans to form a company, now is the time to put down the phone/bagel/toddler and point your immediate attention this way. A major change has recently been enacted that stands to affect every corporation, limited liability company and other business entity currently in existence and which may be formed in the future, installing new, affirmative reporting obligations for the owners and managers of these entities. Failure to comply with these new requirements could lead to substantial penalties and, in the worst-case scenario, criminal punishments. If you have a company and haven’t considered the effect of the Corporate Transparency Act (CTA), it is imperative that you do so promptly.
Background: Effective January 1, 2024, the CTA was created as part of a federal effort to crack down on money laundering through small companies and so-called shell companies. It specifically targets small companies, such as corporations, limited liability companies, limited partnerships, and even certain business trusts. These entities must now comply with detailed reporting requirements and subjects companies—and their owners/members—to severe penalties, including criminal penalties, for failing to report required information to the Financial Crimes Enforcement Network (FinCEN).
What is Required: The basic premise of the CTA is that all applicable companies must file “CTA Reports” with FinCEN which disclose certain critical information: full company name, any trade names or DBAs, principal address, IRS taxpayer identification number, and personal information about the company’s beneficial owners, including their full names, dates of birth, residential addresses, and government-issued ID numbers (e.g., driver’s license and passport numbers). A “beneficial owner” includes anyone who (a) owns more than 25% of a company or (b) exercises “substantial control” over it, such as an officer, manager, or even a minority shareholder with preferential rights. Deadlines to file are short. Companies formed during calendar year 2024 have 90 days from the date of formation to file their CTA Reports with FinCen, while those formed after this year will only have 30 days (companies formed before this year have until January 1, 2025 to file). No matter when the company is formed or when it files its CTA Report, updated CTA Reports must be filed within 30 days of any change to the disclosed information.
Next Steps: We strongly encourage you to designate a trusted person to review this letter, research and understand the CTA’s application to your company, and be prepared to file the CTA Report well before your company’s filing deadline. Weintraub has created several resources to assist you in this process, including an overview notice, a webinar, an email list for ongoing updates, and an in-house CTA Compliance Team. Please don't hesitate to let me know if I can provide any guidance.
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