Starting January 1, 2024, a significant change in corporate reporting requirements comes into effect with the effective date of the Corporate Transparency Act (CTA). This new legislation mandates that certain types of companies must disclose specific ownership information to the U.S. Department of the Treasury. Failure to comply with these reporting obligations can result in substantial monetary penalties, amounting to $500 per day, and up to a maximum of $10,000.

THE FOLLOWING ALERT COMES DIRECTLY FROM THE FINCEN WEBSITE: FinCEN has been notified of recent fraudulent attempts to solicit information from individuals and entities who may be subject to reporting requirements under the Corporate Transparency Act . . . Please do not respond to these fraudulent messages, or click on any links or scan any QR codes within them.

In response to these alerts, Schwartz Ettenger has geared up to be your trusted source for CTA compliance and filings. For a flat fee (depending on the ownership structure) we will provide:

  • Analysis for Determination of Exemption (Free)
  • A Checklist of What is Required from Each Beneficial Owner (Shareholders, Directors & Officers)
  • An Encrypted/Safe portal to upload required documentation
  • Filing with FinCEN
  • Follow Up Reminders Each Year to Help You Stay in Compliance

Understanding the Corporate Transparency Act (CTA)

This flier provides information relating to key provisions of the CTA, the types of companies affected.

The Corporate Transparency Act is a federal law enacted to enhance transparency in corporate ownership and curb illicit activities such as money laundering, fraud and other financial crimes. It requires most companies to report information regarding their “Beneficial Owners” to the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of the Treasury.

Companies Required to File

The CTA applies to “reporting companies,” which are defined as corporations, limited liability companies (LLCs) or other similar entities that are formed by filing documents with state authorities. This is a federal law, so it applies to all corporations and LLCs formed under the laws of any state or Indian Tribe.

Exemptions from Compliance

It’s important to note that not all entities are subject to the reporting requirements of the CTA. Certain types of companies are exempt from compliance, including the following types of companies:

  1. Publicly Traded Companies: Entities whose securities are registered under Section 12 of the Securities Exchange Act of 1934 or that are required to file reports under Section 15(d) of the Act are exempt.
  2. Financial Institutions: Entities regulated by a federal or state agency and entities that are already subject to similar reporting requirements are also exempt.
  3. Larger Companies with Physical Presence: Companies are exempt from filing if they meet ALL of the following criteria: (i) have a physical presence in the United States (i.e. office, store or other location), (ii) employ more than 20 full-time employees, and (iii) report at least $5 million in annual gross sales.

Compliance Requirement – Reporting Beneficial Ownership Information

Under the CTA, reporting companies are obligated to provide information about their beneficial owners to FinCEN. Who qualifies as a “Beneficial Owner” is not always so clear. Generally, “Beneficial Owners” are individuals and trust beneficiaries who, directly or indirectly, hold at least a 25% ownership interest in the reporting company, as well as individuals who have substantial control over the entity. This may include executives, directors and others who play a significant role in the company’s operations and decision-making.

Reasons Compliance with the CTA is Imperative

  1. Avoid Costly Penalties: Failure to comply with the reporting requirements of the CTA can lead to substantial financial penalties. The Act prescribes a penalty of $500 per day for non-compliance, with a cap of $10,000.
  2. Enhance Transparency and Accountability: The CTA aims to bring greater transparency to corporate ownership structures, making it harder for individuals or entities to hide behind layers of anonymity. This increased transparency promotes accountability and deters illicit activities.
  3. Avoid Legal Repercussions: Non-compliance with the CTA may lead to legal consequences, including potential criminal charges or civil liabilities for the company and its officers.

WE CAN HELP YOU COMPLY. We encourage you to contact us as soon as possible if you would like us to assist you with determining the filing requirements and making the required filings on your behalf to ensure timely compliance with the Corporate Transparency Act.