Beware! The Corporate Transparency Act is Upon Us
By Brandon K. Jones, Carruthers & Roth, P.A.
Beginning January 1, 2024, the Corporate Transparency Act (“CTA”) goes into effect and will impose stringent Federal reporting requirements on many small businesses. The CTA was passed by Congress to enhance transparency in entity structures and ownership in an effort to help the government combat money laundering, foreign interference, fraud, and other illegal activities.
If you own an interest in or otherwise manage or control a corporation, limited liability company, or any other business entity formed by a filing with a secretary of state (whether in North Carolina or any other state), please review this alert carefully and in its entirety.
The CTA, codified at 31 U.S.C. § 5336, et seq., and regulations promulgated by the U.S. Department of the Treasury, will require nearly all small businesses in the United States to file reports with the Financial Crimes Enforcement Network (“FinCEN”). Although the reporting requirements do not go into effect until January 1, 2024, all business entities formed at any time (including before January 1, 2024) are potentially subject to the CTA and will be required to file and update reports with FinCEN beginning on January 1, 2024.
Specifically, all applicable small businesses (referred to as “Reporting Companies”) will be required to report various information to FinCEN about both the Reporting Company itself, and also about the Reporting Company’s “Beneficial Owners.” In addition, Reporting Companies formed after January 1, 2024, will be required to provide information about the person or persons who participated in filing the Reporting Company’s formation documents with the secretary of state (called the “Company Applicant”).
Although there are exceptions to the reporting requirements for some types of businesses, these exceptions are generally limited to very large companies, and to companies in industries that are already highly regulated by the Federal government. No business should assume that it is exempt from CTA reporting requirements, as the overwhelming majority of small businesses will be required to report.
Information that must be reported about each Reporting Company includes:
1) Full legal name of the company
2) All trade names and “DBA’s”
3) Street address of the principal place of business
4) EIN
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