November 29, 2023
After years of delays, the first stage of the Corporate Transparency Act (CTA) goes into effect on January 1, 2024. It imposes a new federal filing requirement for most corporations and limited liability companies (LLCs).
The CTA’s purpose is to prevent the use of anonymous shell companies for money laundering, tax evasion, and other illegal purposes. But it applies to honest business owners as well as criminals.
The CTA does not apply to all businesses. It applies only to entities such as corporations, multi-member LLCs, single-member LLCs and others formed by filing a document with a state secretary of state or similar official. It doesn’t apply to sole proprietors.
Some businesses are exempt, including:
· large businesses—businesses with more than 20 full-time employees and $5 million in receipts on their prior-year tax return,
· certain businesses already heavily regulated by the government, such as banks and insurance companies,
· nonprofits, and
· several others.
The CTA’s purpose is to compile a massive government database containing the identities and contact information of the “beneficial owners” of most types of business entities. Beneficial owners are the humans who own or exercise substantial control over the entity.
For most reporting companies, identifying the beneficial owners is simple. For example, a three-member LLC in which each member has a one-third ownership interest has three beneficial owners. Identifying beneficial owners for reporting companies with complex ownership structures can be more difficult.
Existing LLC’s and corporations will have time of 12 months from January 1st, 2024, to file the beneficial owner information report with the Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN)—the Treasury Department’s financial intelligence unit. The report must contain the following for each beneficial owner:
· Full legal name
· Date of birth
· Complete current residential street address
· A unique identifying number from a current U.S. passport, state or local ID document, driver’s license, or foreign passport
· An image of the document that contains the unique identifying number.
The beneficial owner information report is filed online at a new federal database called BOSS (an acronym for Beneficial Ownership Secure System). You can’t file until January 1, 2024. You don’t pay any filing fees. The information in the BOSS database is strictly for use by law enforcement, the IRS, and other government agencies. FinCEN does not disclose the BOSS information to the public.
Please be aware there are substantial penalties imposed under Act for failure to file or comply with requirements of the Act.
FinCEN has already been notified of fraudulent attempts to solicit information from individuals and entities who may be subject to reporting requirements under the Corporate Transparency Act. The fraudulent correspondence may be titled "Important Compliance Notice" and asks the recipient to click on a URL or to scan a QR code. Those e-mails or letters are fraudulent. FinCEN does not send unsolicited requests. Please do not respond to these fraudulent messages or click on any links or scan any QR codes within them.
If you want our assistance with your required reporting and the necessary filings, please call us at 615-444-1149. Please note that as is our policy, we will not automatically file a report on your behalf without your request and authorization.