A Brief Guide to the Federal Corporate Transparency Act – Compliance Required for Small Business Owners

Starting January 1, 2024, if you own a small business or just an LLC that owns one piece of property, you will be required to comply with a new federal law: The Corporate Transparency Act (“CTA” for short). Failure to comply with the CTA can lead to civil and criminal penalties. We are here to help! Read below to get more details and to access resources. If you need legal advice regarding your obligations and duties, please contact Lyons Gaddis, P.C. at 303-776-9900.

WHO:

Starting January 1, 2024, all entities that are created by filing a document with a state (this includes LLCs, corporations, and similar entities) must report identifying information about the people who own the entity or control it, called its “beneficial owners,” and the people who created the entity by filing documents, the “applicants,” to the United States Treasury Department’s Financial Crimes Enforcement Network (“FinCEN” for short). If a trust is an owner of the entity, there are additional reporting considerations. There are certain exemptions for larger businesses or entities that are more fully regulated by the government (501(c)(3) charities for example).

WHAT:

If the Act applies to your business or entity, then you will need to submit a report to FinCEN that identifies each beneficial owner and applicant. This report must contain current information including: (1) full legal name; (2) birthdate; (3) current residential address; (4) a unique identifying number and issuing jurisdiction from an acceptable identification document (think passports, state driver’s licenses); and (5) a picture of the identification document. This information will not be publicly available but will be available to certain governmental authorities.

To make things easier for people who are involved in multiple entities, FinCEN will create a streamlining process where you provide the information stated above to them once and get a “FinCEN identifier” which you can then provide to FinCEN instead of the report for each entity.

WHEN:

This rule is effective on January 1, 2024. FinCEN will begin accepting reports through its secure online filing system on that date. If your entity already exists as of January 1, 2024, it needs to file its initial report by January 1, 2025. If your entity is created or registered to do business in the United States after January 1, 2024 but before January 1, 2025, then it must file its initial report within 90 calendar days after creation. If your entity is created or registered to do business in the United States after January 1, 2025, then it must file its initial report within 30 calendar days after creation.

If there is any change to information filed (for instance, a beneficial owner dies, the identification document expires or is replaced, or the beneficial owner moves to a new residential address) you will have 30 days to file an updated report with current information.

HOW:

Starting January 1, 2024, you will be able to file required information through FinCEN’s online secure filing system.

For more information, see FinCEN’s website here and its Small Entity Compliance Guide here.

The information contained on this blog is intended to be general information only and not legal advice. This blog topic is not intended to be fully comprehensive. For these reasons, we suggest you seek a licensed attorney for legal advice. If you have any questions about the contents of this blog or if you need legal advice regarding your obligations and duties, please contact Lyons Gaddis, P.C. at 303-776-9900.