Heads up to all US business owners, that includes you, real-estate LLC!
The Corporate Transparency Act (CTA) is a law that requires certain types of corporations, limited liability companies, and other similar entities created in or registered to do business in the United States to report their beneficial ownership information to the Financial Crimes Enforcement Network (FinCEN) 12. The CTA was passed as part of the Anti-Money Laundering Act of 2020 and is set to take effect on January 1, 2024.
According to the Financial Crimes Enforcement Network (FinCEN), “Illicit actors frequently use corporate structures such as shell and front companies to obfuscate their identities and launder their ill-gotten gains through the United States. Not only do such acts undermine U.S. national security, they also threaten U.S. economic prosperity: shell and front companies can shield beneficial owners’ identities and allow criminals to illegally access and transact in the U.S. economy, while disadvantaging small U.S. businesses who are playing by the rules. This rule will strengthen the integrity of the U.S. financial system by making it harder for illicit actors to use shell companies to launder their money or hide assets.” FinCEN is a division of the Department of the Treasury.
A “reporting company” is any corporation, LLC, partnership or like entity that is created by filing a formation document with a secretary of state; or formed in a foreign country and registered to do business in the United States. There are only a few businesses that are exempt from these new reporting requirements, and they are businesses that already must disclose their ownership. The exemptions to the new rules are:
- Public companies
- Financial institutions (such as banks, credit unions, brokers, dealers, and exchange and clearing agencies)
- Investment companies
- Insurance companies operating within the United States
- Non-foreign-owned shell companies
- Public utility companies
- Accounting firms
- Pooled investment vehicles
- Nonprofit and political organizations
- Entities that employ more than 20 employees, filed federal tax returns demonstrating more than $5 million in gross receipts or sales, and have an operating presence within the United States.
If you are not an exempt entity, you should file the required forms. FinCEN estimates the cost of complying with the new requirements will be about $85 for most businesses. However, the penalties for non-compliance can be expensive; $500 per day up to a maximum of $10,000.
The information will be stored much the same as your income tax filings and will have much the same restrictions of access. Beneficial Ownership information will not be accepted prior to January 1, 2024. The FinCEN website will also post any form they may require prior to the effective date of the legislation.
