December 13, 2023

Regulatory Update – Corporate Transparency Act

Beginning January 1, 2024, business owner clients will need to comply with the new federal Corporate Transparency Act.  The Act requires and enforces new business entity reporting rules with the intent of fighting money laundering and terrorism financing.

Unless a business is otherwise regulated or a large operating company, all persons that maintain an LLC, a corporation, or similar entity formed prior to 2024 will have the 2024 calendar year to file a report with the Treasury Department’s Financial Crimes and Enforcement Network (“FinCen”).  The report will list information for all beneficial owners who own or control at least 25% of the ownership interests in the reporting company.  For companies formed after January 1, 2024, the Act requires a report filed with FinCen within 90 days of formation of the company.  Changes of beneficial ownership in a company must also be reported to FINCen.

An important exemption from the Corporate Transparency Act’s reporting requirements are large operating companies.  These companies are defined as having 20 or more full time employees in the United States and the entity’s prior year income tax return reports more than $5,000,000 in gross receipts or sales within the United States.

Failure to file the necessary reports can result in civil or criminal action and the willful failure to file a complete report is subject to a $500 per day fine (up to $10,000) and imprisonment for up to two years.

If you have an estate plan with an entity interest, or operate a closely held company, the Corporate Transparency Act likely affects you and you should consult with appropriate advisors.

Notice and Disclosure: The above information is provided for informational and general purposes only and is not legal or tax advice, nor does it take into account particular financial circumstances or needs of any individual client.