Overview of the Corporate Transparency Act (CTA)
The Corporate Transparency Act, effective upon January 1st, 2024, is designed to enhance transparency and prevent the illicit use of certain entities for money laundering, terrorist financing, and other illicit activities. One of the central components of the CTA is the requirement for entities to disclose their beneficial ownership information.
Key Highlights of the Beneficial Ownership Disclosure Form
1. Definition of Beneficial Ownership
The CTA introduces a standardized definition of beneficial ownership, which includes individuals who directly or indirectly exercise substantial control over an entity or own at least 25% of its ownership interests.
2. Reporting Obligations
Certain entities, including all private entities, e.g. Limited Liability Company, Corporation, Partnerships and foreigner registered companies registered with US State Secretary of State to do business in certain states, are now obligated to submit a Beneficial Ownership Disclosure Form to the Financial Crimes Enforcement Network (FinCEN). The form requires the disclosure of specific information about the individuals considered beneficial owners, including but not limited to direct and indirect beneficiary owners or the person in substantial control (company officials).
3. Reporting Deadlines
Companies registered before January 1st, 2024 are obligated to file the report on or before January 1st, 2025. Companies registered after January 1st, 2024 has up to 90 days to file the report.
Penalty for Late Filings
The CTA authorizes civil and criminal penalties for willful failure to report complete or updated information. Violators can incur a civil penalty of up to $500 for each day that a violation has not been remedied and a fine of up to $10,000 and/or imprisonment for up to two years.
Action Steps for Owners of Private Entities
To ensure compliance with the Corporate Transparency Act, we recommend that all affected clients take the following steps:
Review Attached Document: Please carefully review the attached document outlining the key provisions of the Corporate Transparency Act and the Beneficial Ownership Disclosure Form.
Assess Impact: Evaluate how the new requirements may impact your organization, including any adjustments needed to existing structures or internal processes.
Compliance Measures: Implement necessary measures to ensure timely and accurate compliance with the Beneficial Ownership Disclosure Form filing obligations.
Legal Consultation: If you have any questions or concerns regarding the Corporate Transparency Act or its implications for your business, do not hesitate to reach out to our legal team for guidance.
Contact Us
We understand that legal updates can be complex, and we are here to assist you throughout this process. Should you require further clarification or wish to discuss the specific implications for your organization, please feel free to contact our office.