Insights
Thought Leadership
January 8, 2024
Estate Planning Update Winter 2023/2024 - Corporate Transparency Act: New Reporting Requirements for Family-Owned LLCs and Other Business Entities
The Corporate Transparency Act (CTA) is a new federal law that took effect on Monday, January 1. A summary of the CTA and its regulations can be found here in our previously published Generations newsletter spring/summer 2023 edition. The goal of the CTA is to allow the Financial Crimes Enforcement Network (FinCEN) to gather information related to the ownership and control of closely held corporate entities, as a tool for federal, state and local law enforcement agencies to prevent money laundering and other criminal activity, including acts of terrorism.
The CTA creates a broad beneficial ownership reporting requirement for "reporting companies." A reporting company is a corporation, limited liability company (LLC) or other similar entity (i) created by the filing of a document with the secretary of state of a given state or (ii) formed under the laws of a foreign country and registered to do business in the United States. Common law trusts and common law partnerships are not reporting companies. Examples of "other similar" entities include limited partnerships and limited liability partnerships, which are also classified as reporting companies. However, there are 23 categories of exempt entities that are not subject to the reporting requirements. The CTA does not apply to any entity with (i) more than 20 full-time employees, (ii) a physical office in the United States and (iii) more than $5 million in sales or gross receipts as documented on federal tax returns filed the prior year. Other exempt entities are mostly large entities that are already subject to federal and state regulatory reporting requirements.
Reporting companies are required to disclose certain personal information for all "beneficial owners" through the filing of a beneficial ownership information (BOI) report. Beneficial owners are generally defined as persons who own or control at least 25% of the ownership interests and persons who exercise "substantial control" over the reporting company. Four pieces of information must be disclosed about each beneficial owner:
This document (and any information accessed through links in this document) is provided for informational purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.
- Name;
- Date of birth;
- Current residential address;
- The identifying number and issuer of a current U.S. passport, state-issued driver's license or similar identification document issued by a state (including a U.S. territory or possession), local government or Indian tribe. If none of those documents exist, an unexpired foreign passport can be used. An image of the identifying document must also be uploaded with the BOI report.
This document (and any information accessed through links in this document) is provided for informational purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.