Understanding the Corporate Transparency Act: New Reporting Requirements for U.S. Registered Entities

The Corporate Transparency Act (the, “CTA”), part of the Bank Secrecy Act, has created new reporting requirements for any entity that is registered to do business in the United States of America. The reporting requirements apply to any entity that falls under the CTA’s definition of “Reporting Company” and for which no exemption, as described in the CTA, applies. It requires that these companies disclose the beneficial ownership information of people who own or control the company.

All reports will need to be filed by the company with the Financial Crimes Enforcement Network (“FinCEN”).  Companies must determine whether they are required to file with FinCEN before January 1, 2025. Companies who are required to file and do not can face civil and criminal penalties of US$500 per day up to US$10,000 and up to two years of jail time. At this time, the beneficial ownership information that is filed with FinCEN is not expected to be made publicly available, however it can be accessed and used by United States law enforcement. The information in this memo is general information and should not be applied to your specific facts without consultation with appropriate legal counsel.

Reporting companies created before January 1, 2024, need to file their initial report by January 1, 2025.

Reporting Companies

Reporting companies are divided into two categories: 1) “domestic reporting companies” and 2) “foreign reporting companies”.

Domestic reporting companies are corporations, limited liability companies, or similar entities created by the filing of a document with a secretary of state or any similar office under the law of the State or Indian tribe.

Foreign reporting companies include a corporation, limited liability company or other entity, formed under the law of a foreign country, and registered to do business in any State or tribal jurisdiction by the filing of a document with a secretary of state or any similar office under the law of the State or Indian tribe.

There are 23 category exemptions that can apply to reporting companies that are outlined in the CTA. The exemptions include, for example, publicly traded companies, financial institutions, pooled investment vehicles, and large companies that have a sufficient presence in the United States. These are not blanket exemptions; competent legal counsel may be able to advise you as to whether one of the filing exemptions would apply to you.

Beneficial Ownership Information

Where there is no exemption available to a reporting company, they must provide information that sufficiently establishes the identities of each “beneficial owner” of the company.

A “beneficial owner” is an individual who, directly or indirectly: exercises substantial control over the reporting company or owns or controls at least 25% of the ownership interest of a reporting company. The CTA defines further the terms substantial control and ownership interest.

How To File

The reporting company needs to submit the required reports to FinCEN through their online portal on the form they provide. The forms and online submission portal can be found here: https://www.fincen.gov/

After the initial filing reporting companies will only need to complete additional filings if a change occurs in the company. In which case the company will have 30 days from the date of the change to file an updated report with FinCEN.

Deadlines

• Reporting Companies created before January 1, 2024, need to file their initial report by January 1, 2025.
• Reporting Companies created between January 1, 2024, and January 1, 2025, need to file their initial report within 90 calendar days of receipt of actual or public notice, whichever comes first, that their creation or registration is effective.
• Reporting Companies created after January 1, 2025, need to file their initial report within 30 calendar days of receipt of actual or public notice, whichever comes first, that their creation or registration is effective.
• Reporting Companies that have changes to previously reported information or want to correct deficiencies in previously filed reports must file within 30 calendar days of the change.

It is the reporting company’s responsibility to file the report directly with FinCEN.

Notice

LaBarge Weinstein LLP does not practice law in the United States of America. This memo is not to be considered advice, but as a notice. You will need to consult a lawyer who practices law in the United States of America for any advice on the CTA and filings.