The Corporate Transparency Act requires certain “Reporting Companies” to report “Personally Identifiable Information” associated with their “Beneficial Owners” to the Financial Crimes Enforcement Network (“FinCEN”). Congress passed this law because Congress thought the reporting process would help criminal, money laundering, fraud, tax, and terrorism investigations.
Reporting Companies include corporations, limited liability companies, and similar entities that are formed under the laws of any State or Indian Tribe. Reporting Companies do not include certain banks, credit unions, investment companies, charitable organizations, political organizations or public accounting firms. Companies otherwise required to report may be exempted from reporting if: 1) they employ more than 20 full-time employees in the United States; 2) filed Federal tax returns that demonstrated more than $5MM in gross receipts of sales; and 3) have a physical office within the United States.
Personally Identifiable Information
Personally Identifiable Information includes a Beneficial Owner’s: 1) full legal name; 2) date of birth; 3) current address; and 4) acceptable identification document (e.g. nonexpired passport, driver’s license, state identification document or unique FinCEN identification number).
A Beneficial Owner is any individual who, directly or indirectly, exercises “substantial control” over an entity or owns or controls at least 25% of the “ownership interests” of an entity.
Beneficial Owners do not include: 1) minors, if their parent or guardian’s Personally Identifiable Information is submitted; 2) agents of other individuals; 3) persons whose control or economic benefits over an entity are derived solely from their employment status; and 4) persons who inherited all their interest in an entity.
Why Should I Care?
All existing Reporting Companies will have to report the requested information within two years after the Secretary of the Treasury promulgates final regulations regarding the registration process. We expect that the regulations will be promulgated by January 2022. After the regulations are promulgated, each new Reporting Company formed will make its report when it files for formation or registration under state law. Failing to report can result in fines of up to $10,000 ($500/per day) and/or imprisonment for up to two years.
Disclaimer: This document is made available for educational purposes as well as to give general information and a general understanding of the law, not to provide specific legal advice. This document should not be used as a substitute for competent legal advice from a licensed professional attorney in your state. Use of this document does not create an attorney-client relationship between you and the publisher. If you have any questions, please contact Shannon Wilde in the Business Law Section.
Similar entities formed in foreign countries that are registered to do business in the United States may also have to report.