Three Questions with Bryce Morrison on Corporate Transparency Act Compliance
Ringing in the new year also means reading up on new laws, such as the Corporate Transparency Act (CTA), which took effect January 1, 2024. The CTA creates a new reporting requirement for nearly every entity formed or registered to do business in the United States. We asked Shareholder Bryce Morrison to break down what this means for businesses.
What is the Corporate Transparency Act and why is it significant?
The CTA creates a new beneficial ownership information reporting requirement as part of the U.S. government’s efforts to fight money laundering and terrorism financing. This requirement to report beneficial owner information was not part of the usual practice of forming and operating a business entity in the U.S. prior to 2024. Consequently, businesses and their professional advisors will need to change their procedures to ensure compliance with this new requirement.
Who needs to report and when?
With some limited exceptions, every entity formed or registered to do business in the United States, whether already existing or newly formed, is required to file a report listing its beneficial owners with the Financial Crimes Enforcement Network (FinCEN) of the United States Department of Treasury.
Specifically, the CTA requires a “reporting company” to file a report. A “reporting company” is any corporation, limited liability company, partnership, or other similar entity formed in the United States. Entities formed in foreign countries are also required to file a report if they are registered to do business in the United States. There is a lengthy list of entities that are exempt from the definition of a “reporting company” and they are not required to file a beneficial owner report.
The timing for filing a report depends on when the entity was formed. Generally speaking, the report must be filed with FinCEN within 30 days of forming an entity. An updated report must be filed within 30 days of any change in the information contained in the original report. Entities existing on or before December 31, 2023, have one year to file a report. For new entities formed on or after January 1, 2024, the report must be filed within 90 days of formation. For new entities formed on or after January 1, 2025, the report must be filed within 30 days of formation.
How is Bernstein Shur helping clients comply with CTA?
Our Business Law Practice Group has had our eye on the CTA since the legislation passed in 2021 and has been actively assisting clients with preparations for compliance. We have prepared a summary of what businesses need to know about these new ownership reporting requirements, available here. If you have any questions about whether or when you need to file a report, our interdisciplinary business law team is ready to help – contact me at firstname.lastname@example.org.