Beginning on January 1, 2024, most U.S. companies will be required to report ownership information to the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of the Treasury. To comply with the new Act – called the Corporate Transparency Act (CTA) – companies will have to identify their “beneficial owners,” the individuals who ultimately own or control the company.
Why: FinCEN is requiring this “Beneficial Ownership Reporting” to create a database of information vital to combating tax fraud, terrorism and money laundering.
Who: In general, the Act applies to U.S.-formed corporations and limited liability companies (LLCs) along with certain foreign-owned entities doing business in the States. Many sole practitioners, small businesses and middle-market businesses will be required to file ownership reports.
What: The report requires companies to provide information on any individual who, directly or indirectly, exercises substantial control over the company, owns or controls at least 25% of its ownership interests.
When: For companies established before December 31, 2023, the deadline for reporting is January 1, 2025. Those created on or after January 1, 2024 must file within 30 days of initial registration of the business. Failure to comply and late compliance can result in criminal fines, imprisonment or civil financial penalties.
Next Steps: Although we are pleased to alert you to this new reporting requirement, assisting with compliance is outside the scope of what firms like ours can undertake. We encourage you to consider consulting with legal counsel if you have questions regarding the applicability of the CTA’s reporting requirements and issues surrounding the collection of relevant ownership information.
Find more information at fincen.gov.