The Corporate Transparency Act of 2022 (“CTA”) was enacted on January 1, 2021. Congress enacted the CTA to expand anti-money laundering laws and to protect against corporate corruption and fraud. The biggest impact the CTA will have on current and future business owners is the new reporting requirements. Beginning on January 1, 2024, certain business entities will be required to report information regarding their entity and key individuals to the Department of Treasury.

Who Needs to Report?

The CTA requires any entity that is a (1) corporation, (2) limited liability company (“LLC”), or (3) any other similar entity, usually entities created by filing with a Secretary of State or any similar office, to file certain information with the Department of Treasury’s Financial Crimes Enforcement Network (“FinCEN”). Examples of required entities include corporations, LLCs, limited partnerships, business trusts, statutory trusts, and other similar entities. The CTA does not require reporting only for entities formed in the United States. Any corporation, LLC, or other entity that is formed under the laws of a foreign country but is registered to do business in any state within the US, must also file information with FinCEN. Entities that are required to report information to FinCEN are called “Reporting Companies.”

Exemptions:

There are a number of exempt entities, who would otherwise qualify as Reporting Companies, that do not have to file information with FinCEN. The three main exemptions are for (1) Large Operating Companies, (2) Fund-Related Entities, and (3) Subsidiaries.

Large Operating Companies: Companies that (i) employ more than 20 full-time employees; (ii) filed more than $5,000,000 in gross receipts or sales in the aggregate on US tax return in the previous year; and (iii) have an operating presence at a physical office within the US are not required to file information with FinCEN. This exemption also applies to publicly traded companies that issue securities and are registered under Section 12 of the Securities Exchange Act (Exchange Act) or are otherwise required to file under Section 15(d) of the Exchange Act.

Fund-Related Entities: Certain fund-related entities are also exempt. This includes SEC registered investment advisers, SEC registered investment companies, venture capital fund advisers that have made certain filings with the SEC, commodity pool operators and commodity trading advisers registered with CFTC, and funds operated or advised by a bank, federal or state credit union, SEC registered broker-dealer, SEC registered investment company or investment adviser, or venture capital fund adviser.

Subsidiaries: The final exemption category is subsidiaries. Subsidiaries that are controlled or wholly owned, directly or indirectly, by certain exempt entities do not have to file information with FinCEN.

What Do You Need to Report?

The CTA requires Reporting Companies to file the following information about the entity with FinCEN: (1) entity name (including any alternate D/B/As); (2) business street address; (3) jurisdiction of formation or registration; and (4) unique identification number (EIN, TIN, LEI, etc.).

Along with information about the entity, Reporting Companies must also report the following information about any Beneficial Owners of the Reporting Company: (1) full legal name; (2) date of birth; (3) current residential or business street address; and (4) unique identifying number from state ID or passport and an image of the document. A Beneficial Owner is any individual who directly or indirectly either (i) exercises substantial control over a Reporting Company; or (ii) owns or controls at least 25% of the ownership interests in the Reporting Company.

When Do You Need Report?

The CTA has slightly different reporting requirements for Reporting Companies that were created before January 1, 2024 and those created after. If the Reporting Company was created before January 1, 2024, the Reporting Company must file the required information with FinCEN before January 1, 2025. If the Reporting Companies was created on or after January 1, 2024, the Reporting Company must file the required information within 30 days of receiving notice of effective formation or registration. If a Reporting Company needs to change and of the reported information, they must report such change within 30 days of the change.