Most Companies Will Be Required to File a Beneficial Owners Information Report by January 1, 2025
On January 1, 2024, the Corporate Transparency Act (“CTA”), originally enacted by Congress in 2021, went into effect across the United States. The goal of Congress in having enacted the CTA is to make it harder for bad actors to hide or benefit from their ill-gotten gains through shell companies or other opaque ownership structures. For example, reporting requirements under the CTA will aid in combatting illegal activities such as money laundering or tax fraud.
As a result, under the Beneficial Ownership Information Reporting Rule of the CTA, millions of small businesses across the country will be required to report information about their beneficial owners to the U.S. Department of Treasury’s Financial Crimes Enforcement Network. A company may be required to file a report if it is: (1) a corporation, a limited liability company (“LLC”), or was otherwise created in the United States by filing documents with a secretary of state or any similar office under the law of a state or Indian tribe; or (2) a foreign company and was registered to do business in any U.S. state or Indian tribe by such a filing. With that being said, Congress has created 23 categories of entities that are exempt from the registration requirement, including governmental authorities, banks, public utilities, etc. However, in general, most non-publicly traded entities with less than 20 full-time employees and less than $5,000,000 in gross receipts or sales will be required to file a report.
Identifying Beneficial Ownership (And the Cost for Not Identifying a Beneficial Owner)
Accordingly, reporting companies will be required to identify all of their beneficial owners. Pursuant to the CTA, a beneficial owner is any individual who, directly or indirectly, exercises substantial control over a reporting company or owns or controls at least 25% of the ownership interests of a reporting company. Reporting companies created or registered to do business before January 1, 2024 will have until January 1, 2025 to identify their beneficial owners and file their reports.
Importantly, the willful failure to report complete and accurate beneficial ownership information may result in both civil and/or criminal penalties. Those found to be in violation of the reporting requirements may face civil penalties of up to $500 for each day that the violation continues, or criminal penalties including imprisonment for up to two years and/or a fine of up to $10,000. Furthermore, senior officers of an entity that fails to file a required report may be held personally accountable for that failure.
Talk with Our Corporate Transparency Attorneys
With these new requirements, it is vital to ensure that beneficial ownership information for your company is submitted accurately and in a timely manner. Plakas Mannos’ corporate transparency attorneys have represented businesses and business owners across numerous industry sectors for more than five decades. With this newly enacted requirement, allow our attorneys to help you navigate this uncharted terrain. Our business and corporate lawyers are here to assist in all your Corporate Transparency Act related issues, including filing of the Beneficial Owners Information Report.
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