Preparing Your Company for the Corporate Transparency Act

Beginning Jan. 1, 2024, a new federal law will take effect requiring certain businesses to disclose information to the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN).

The law, known as the Corporate Transparency Act (CTA), was enacted to make it harder for criminals, organized crime rings, terrorists, and other illicit actors to hide their identities and launder money through anonymous shell companies.

To help you determine what this means for your company, we have outlined key points below.

But first, be aware that 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. The fraudulent correspondence may be titled "Important Compliance Notice" and asks the recipient to click on a URL or to scan a QR code. Those e-mails or letters are fraudulent. FinCEN does not send unsolicited requests. Please do not respond to these fraudulent messages, do not click on any links, and do not scan any QR codes within them.

Does the CTA apply to you?

The CTA applies to all “reporting companies.” A reporting company is any entity that was created by filing a document with the secretary of state or similar office and which does not qualify for an exemption. Exemptions include:

(a) Publicly traded organizations
(b) Large businesses, as defined by the statute
(c) Banks, bank holding companies, and federal or state credit unions
(d) Investment companies
(e) Public utilities
(f) Insurance companies
(g) Tax-exempt organizations
(h) Inactive businesses

What information must you provide under the CTA?

A reporting company formed before or after Jan. 1, 2024, must file identifying information of:

(a) the reporting company, including the legal name, address, registered jurisdiction, and federal tax ID number; and
(b) the beneficial owners of the reporting company, including non-owners with substantial control, as defined in the statute, and/or who own 25% or more of the reporting company.

A reporting company formed after Jan. 1, 2024, must also report identifying information of the reporting company applicants.

When do you need to provide the required information to FinCEN?

A reporting company formed prior to Jan. 1, 2024, will have until Jan. 1, 2025, to file its required information. A reporting company formed after Jan. 1, 2024, but before Jan. 1, 2025, will have 90 days from formation to file its required information. After the reporting company’s initial filing, it will be required to report changes in the required information to FinCEN within 30 days of the change.

How do you file the information?

The form to report beneficial ownership information is not yet available. Once available, information about the form will be posted on FinCEN’s beneficial ownership information webpage.

What are the penalties for noncompliance?

Failure to comply with the CTA can result in civil or criminal penalties and may include fines up to $10,000 and imprisonment up to two years.

We Can Help

If you have questions about how to prepare your company for the CTA, please contact one of the Maslon attorneys below.