Have you considered if your company is subject to the new U.S. federal reporting rules of The Corporate Transparency Act (CTA)? The CTA is a new federal law that aims to combat money laundering and terrorist financing by requiring certain U.S. entities to report their beneficial ownership and company applicants’ information to the Financial Crimes Enforcement Network (FinCEN). Starting January 1, 2024, all U.S. businesses, with some exceptions, are required to submit “beneficial ownership” information to FinCEN. You can learn more about CTA here. Below, KPPB LAW shares some preliminary questions to start exploring your CTA requirements.
4 Questions for Reporting Companies to Consider Related to the Corporate Transparency Act
Answer the questions below to determine if your Company is subject to CTA’s reporting requirements that were not required in previous years. If you answer yes to questions #3 or #4, you may be exempt from CTA’s reporting requirement.
- Is your company a domestic corporation, limited liability company (LLC), or another entity formed through state or tribal filings? If your answer is yes, your company may be subject to CTA reporting requirements.
- Is your company a foreign company engaged in business within the United States or tribal jurisdictions? If you answer yes, your company may be subject to CTA reporting requirements.
- Does your company have more than 20 full-time employees in the United States, an operating presence at a physical U.S. office, and has your company filed a U.S. federal income tax or information return for the previous year demonstrating more than $5 million in gross receipts or sales (excluding non-U.S. sources)? If the answer is yes to all, then your company may be EXEMPT from CTA reporting requirements.
- Is your company registered with the Securities and Exchange Commission (SEC) or the Commodity Futures Trading Commission (CFTC), or certain pooled investment vehicles advised by these entities? If you answer yes, your company may be EXEMPT from CTA reporting requirements.
Reporting Deadlines for the Corporate Transparency Act
Domestic Reporting Companies that existed before January 1, 2024, and foreign Reporting Companies registered to do business in a United States before January 1, 2024, have until January 1, 2025, to submit their initial reports to FinCEN.
Reporting Companies that are established between January 1, 2024, and December 31, 2024, will have 90 calendar days to submit their initial reports. Reporting Companies established on or after January 1, 2025, will have 30 calendar days to submit their initial reports. If any changes occur after filing the initial report, it is necessary to update the documents and information within 30 days of the event.
The required reporting information includes legal name, trade name, address, jurisdiction of formation, taxpayer identification number, name, date of birth, and address of each individual who, directly or indirectly, owns or controls at least 25 percent of the ownership interest or exercises substantial control over the reporting company.
Note: Information will need to be filed at the FinCen website portal which will become available on January 1, 2024.
Questions about Compliance with the Corporate Transparency Act?
Take time to understand CTA and review your company’s requirements related to the CTA to ensure compliance in 2024. The financial regulatory reporting requirements are new and some CTA rules are complex. Your KPPB LAW team is here to be a resource to you and help you navigate these new federal requirements. If you have questions related to CTA, please contact Parav Patel, Corporate Law Associate, at ppatel@kppblaw.com.
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