Beginning January 1, 2024, businesses in existence on and after that date will have to comply with a new law that most have probably never heard of, The Corporate Transparency Act (CTA), unless otherwise exempted.

The CTA is a federal business law enacted in 2021 by Congress to address and end the long run of the United States being a haven for “shell” companies that may be used to commit illicit activity such as money laundering; terrorist financing or financial and tax evasion, to name a few.  It is important to note that the new law is a federal mandate for entity reporting that is usually under the purview of the state in which a business was formed and/or does business.  The impact of the CTA will primarily be on small business as opposed to large corporations. In fact, large corporations will most likely meet the CTA’s compliance exemptions. Businesses required to report include corporations, limited liability companies, limited partnerships, business trusts and similar entities, including for profit and nonprofit entities. Reporting will include full legal names, date of birth, residential or business address, and an image of an acceptable governmental issue ID.  There will be an ongoing requirement to keep this information current. Those persons reporting will be those persons having beneficial ownership or “substantial control” over the business or those owning (directly or indirectly) 25% or more of the equity in the business. There are time limits for the required reporting and significant financial penalties, including incarceration, for non-compliance. Companies existing as of January 1, 2024, will have until January 1, 2025 to report the required information while companies newly formed or registered to do business in the United States on or after January 1, 2024 will have to report within 90 calendar days of receiving confirmation/notice that the formation or registration of the new company is effective.  It appears that the process of reporting, while not yet entirely clear, will be made online through BOSS (Beneficial Ownership Secure System) via FinCEN.

The attorneys at Thomas Law Group will continue to monitor the process of reporting to comply with CTA and will be able to advise clients of their responsibility under this Act as the need arises.