INFORMATIONAL COMMUNICATION REGARDING THE CORPORATE TRANSPARENCY ACT
We are contacting many of our clients with whom we have worked on entity formation, ownership, and organizational matters to make them aware of a new federal law that might affect them or their entities. The Corporate Transparency Act (“CTA”) goes into effect on January 1, 2024. Under the CTA, many entities will be required to report the identity and certain personal information of: (1) individuals that directly or indirectly own 25% or more of the entity’s interests; and (2) individuals who directly or indirectly have substantial control of the entity. In addition, entities formed on or after January 1, 2024, will need to identify and report certain personal information about the individuals involved in the entity formation. Twenty-three types of entities are exempt from the CTA’s reporting requirements. Those entities include, but are not limited to, publicly traded companies, nonprofits, and certain large operating companies (i.e., a business with more than 20 full-time employees, an operating presence at a physical office within the United States, and more than $5 million in gross receipts or sales as shown on its previous year’s Federal income tax or information return). A list of the exemptions is enclosed. Please contact us with any questions about the applicability of these exemptions.
Reports will be accepted starting on January 1, 2024.
- If your company was created or registered prior to January 1, 2024, you will have until January 1, 2025, to submit the initial reporting information required under the CTA.
- If your company was created or registered on or after January 1, 2024, and before January 1, 2025, you must report the company’s beneficial ownership information within 90 days of the company’s creation or registration.
- If your company was created or registered after January 1, 2025, you must report the company’s beneficial ownership information within 30 days of the company’s creation or registration.
- If there is any change to the required information about your company or its beneficial owners in a beneficial ownership information report that your company filed, your company must file an updated report no later than 30 days after the date of the change.
The reporting will be made to FinCEN, which is the Financial Crimes Enforcement Network, a bureau of the U.S. Department of the Treasury, and the reporting will take place online. The regulations regarding what entities must report information required under the CTA, how to determine 25% or more direct or indirect ownership or substantial control of an entity, and which of the individuals involved in the formation or registration of entities need to be reported, are complex and too lengthy to attempt to summarize in this communication. The reporting obligation will fall on most small businesses and other entities organized as a corporation, limited liability company, limited partnership, or other form of entity formed by a filing or registered to do business in the United States with an agency of a state (such as the office of the secretary of state) or any federally recognized Native American tribe.
Please be aware that there are civil and criminal penalties for failure to comply with the requirements of the CTA.
To make arrangements for our representation of you or your entity regarding compliance with the CTA, please contact either the attorney with our firm with whom you have worked in the past or, please contact Pam Null-Hollenback at (563)-557-8400, ext. 253, or email@example.com, and she will connect you with one of our attorneys. In addition to engaging our services to help you comply with the reporting requirements of the CTA, you might also wish to engage us to update your entity governance documents to require that the individuals whose information you are obligated to report will be obligated to provide that information to you.
Thank you for your attention and consideration of this information.
O’CONNOR & THOMAS, P.C.
Exemptions to the CTA Reporting Requirements
The CTA’s reporting rule exempts twenty-three specific types of entities from the reporting requirements, which are listed in the chart below. An entity that qualifies for any of these exemptions is not required to submit reports to FinCEN. Whether a company meets the criteria for exemption is a fact-specific analysis. In determining whether an exemption applies, it is important to carefully review the detailed regulatory requirements for each exemption. Please contact our office if you have any questions or concerns regarding whether an entity qualifies for one of the following exemptions.
|Exemption Short Title
|Securities reporting issuer
|Depository institution holding company
|Money services business
|Broker or dealer in securities
|Securities exchange or clearing agency
|Other Exchange Act registered entity
|Investment company or investment adviser
|Venture capital fund adviser
|State-licensed insurance producer
|Commodity Exchange Act registered entity
|Financial market utility
|Pooled investment vehicle
|Entity assisting a tax-exempt entity
|Large operating company
|Subsidiary of certain exempt entities