The Corporate Transparency Act (“CTA”), which takes effect on January 1, 2024, requires certain small- and medium-sized US corporations, LPs, LLCs, and similar closely held entities to report certain company information and beneficial ownership information to the US Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”). The CTA is expected to apply to 32 million entities who, until now, have not been subject to any similar federal reporting requirements.
The CTA requires “reporting companies” to file a report listing:
Reporting companies created prior to January 1, 2024, must file the initial report by January 1, 2025. Under the CTA’s text, reporting companies created on or after January 1, 2024, must file the initial report 30 days from the entity’s creation and a new report within 30 days of any changes (e.g., change of ownership or change of address) or corrections that need to be made. Failure to meet the reporting requirements may result in fines up to $10,000, imprisonment of up to two years, or both. FinCEN in August proposed a deadline extension for entities formed in 2024, but the details of that proposal are not yet clear.
With so much uncertainty surrounding the requirements of the CTA, it is best to prepare now for the CTA before it goes into effect. Here are some practical tips to prepare for the CTA, whether you have old, unused entities collecting dust, are thinking about creating new entities sometime soon, or are operating full steam with existing entities.
There are many as yet unanswered questions about the CTA; as it goes into effect, there are sure to be more.
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