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Client Alert: The Corporate Transparency Act

CORPORATE TRANSPARENCY ACT COMPLIANCE BEGINS JANUARY 1, 2024 FOR BUSINESS ENTITIES FORMED ON OR AFTER THAT DATE

The Corporate Transparency Act (“CTA”) requires that new entities formed on or after January 1, 2024 that are not exempt from the reporting requirements of the CTA must file a notice with the Financial Crimes Enforcement Network (“FinCEN”).  The notice is required to specify “Beneficial Owners” of reporting companies, and for entities formed during the 2024 calendar year, such notice must be filed within 90 days of formation.  Previously, FinCEN had provided for a 30-day filing requirement but on November 29, 2023 FinCEN announced the extension to the timing deadline.  A Beneficial Owner is someone who, directly or indirectly: (a) exercises substantial control over the company; or (b) owns or controls at least 25% of the ownership of the company; or (c) both.  The Notice also requires the disclosure of the individual who filed the formation documents with the Secretary of State or directs or controls the filing, known as the “Company Applicant”.  Many corporate filing services will act as the Company Applicant on behalf of filers if they file your entity formation documents.  Any changes to an entity’s Beneficial Owner information must be reported to FinCEN within 30 days of such change.

Exemptions from the CTA reporting requirements include publicly traded companies, banks, credit unions, insurance companies, tax-exempt organizations under 501(c), and large operating companies (companies that (a) employ more than 20 full-time employees in the U.S.; (b) have an operating presence at a physical office within the U.S.; and (c) reported more than $5 million in gross receipts or sales from U.S. sources on their prior year federal tax return).

AS SUCH, MOST NEW ENTITIES FORMED ON OR AFTER JANUARY 1, 2024 WILL BE REQUIRED TO REPORT UNDER THE CTA WITHIN 90 DAYS OF FORMATION

Companies that were formed prior to January 1, 2024 have until January 1, 2025 to file their CTA Reports with FinCEN.

While Sherin and Lodgen will not be filing the CTA Reports directly, we can assist you with determining if a filing is necessary and provide you with the names of one of the many companies who work specifically on filing the CTA Reports.