As we have outlined in our various blog posts and publications this year, effective January 1, 2024, the Corporate Transparency Act (“CTA”) will require many types of entities – such as corporations, limited liability companies, and limited partnerships – to report certain company and beneficial ownership information to the Financial Crimes Enforcement Network (“FinCEN”). Companies will be able to file their reports electronically online through a FinCEN portal that includes identifying information for the company itself and those individuals who, directly or indirectly, (i) exercise substantial control over, or (ii) own or control at least 25% of the ownership interests of the company. It is similar to the “know your customer requirements” of various financial institutions, although, here, the obligation is placed directly on you and/or your company. Although the reporting requirement is a one-time obligation, not an annual filing, you are under a continuing obligation to update your report within 30 days of any change in information or beneficial ownership.

There are 23 specific types of entities exempt from the reporting requirements, such as publicly traded companies, large operating companies, tax exempt entities, public utilities, investment companies or advisers, and venture capital fund advisers. If no exemption applies, companies created on or after January 1, 2024, have 90 days from the date of formation to file their reports. For example, if you created a company on January 1, 2024, then you must file your report before March 31, 2024. Non-exempt companies that were created before January 1, 2024, however, have until January 1, 2025 to file their reports.

The CTA establishes criminal and civil penalties for knowing or willful non-compliance with its reporting requirements. Financial penalties start at $500 per day of non-compliance, up to $10,000; and criminal penalties could include imprisonment for up to two years.

The FinCEN filing portal will not open until January 1, 2024. As such, additional details on the filing process continue to evolve, as does guidance from the various regulatory authorities responsible for the new requirements. We are closely monitoring these developments.

Should you want our assistance considering the applicability of the CTA to your organization or complying with its filing requirements, please reach out to your primary SRVH attorney or one of the leaders of our CTA compliance team – Will Pugh or Lindsay Dial.

Photo © [Andrey Popov] via Stock.adobe.com