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Legal Alert: The Corporate Transparency Act and Your Business

 

 

JANUARY 2024 MEMORANDUM

 


BENEFICIAL OWNERSHIP INFORMATION REPORTING
CORPORATE TRANSPARENCY ACT

 

SUMMARY

 

One of the unique and often attractive features of a Limited Liability Company can be anonymity.  In most states, formation and registration of an LLC does not require disclosure of the owners or officers.  For various reasons, legitimate and not so legitimate, the owners of a business may not want to broadcast their ownership.  Whether there are genuine concerns regarding privacy and nefarious desires to avoid civil and/or criminal liability, people have availed themselves of this feature.  As such, it can be difficult to identify assets to enforce judgements or confirm net worth in the civil context.  Additionally, it can be difficult to trace financial and criminal wrongdoing to the actual bad actors.

The Federal Government has decided to make things a little easier for itself by creating the Financial Crimes-Enforcement Network or FinCEN.  Try saying that five times fast!  In summary, the U.S. Treasury Department will require the vast majority of LLCs along with C and S corporations to report specific information about the business.  This will include information identifying the ownership of the company.  This is not necessarily a new thing for the shareholders of S and C corporations, but this will be a big change for the members of LLCs.

 

THE RUNDOWN

 

Authority                         United States Department of the Treasury

                                        Corporate Transparency Act (31 USC 5336(b))

                                        Financial Crimes Enforcement Network (FinCEN) Rule

Deadline                          January 1, 2024-January 1, 2025 for entities formed before January 1, 2024

                                        Within 30 days of formation for  entities formed on or after January 1, 2024

Who Must Comply          Any entity that had to file a formation document with a state authority as part of its

                                        formation or registration as a foreign entity doing business in the United States.

                                       YES–Corporations (C, S, B and P), Limited Liability Companies, Limited Partnerships,                                                 Limited Liability Partnerships.

                                       NO—Sole Proprietors, General Partnerships.

Exemptions                    23 Categories of Exemptions and Exceptions to the rule, including inactive entities,                                                   nonprofits, entities that are already subject to federal reporting and regulations,                                                         financial institutions, and government entities.

Corporate Information            Legal Name

                                                Trade Names or D/B/A Names

                                                Address

                                                Formation State

                                                TIN/EIN

Ownership Information          Beneficial Owners. Owners with at least 25% ownership or who have                                                                           substantial control the company directly or indirectly.

                                                Legal Name

                                                DOB

                                                Home Address

                                                Driver’s License, State ID, or Passport Number


  1.  Beneficial Corporation
  2.  Professional Corporation
  3. May depend on the state formation requirements for LPs and LLPs
Picture of said ID


Duty to Update                 
Within 30 days of any change or need to correct information.

 

Failure to Comply             Civil liability $500/day

                                          Criminal penalty up to $10,000 and/or 2 years in jail


THE SOLUTION

 

Resources

FinCEN

https://www.fincen.gov/

Small Business Guide

https://www.fincen.gov/sites/default/files/shared/BOI_Small_Compliance_Guide.v1.1-FINAL.pdf

Legal Support               

Book a Consultation for us to assist you in determining whether your company needs to comply and provide guidance on the process.

www.stulawgroup.com/legal-consultations/

Have SLG handle your reporting for you for a flat rate of $450 (bulk rate available for multiple entities), this includes any updated reporting for the calendar year (up to 3 updates)  

rss@stulawgroup.com

 

LEARN MORE ABOUT THE ATTORNEYS AT SLG ON

FACEBOOK, LINKEDIN, AND AT WWW.STULAWGROUP.COM

 

***DISCLAIMER*** This legal update is being provided for informational purposes only.  Its transmission or receipt is not intended to create an attorney-client relationship between the recipient and Smithers Law Group, LLC.  This legal update is not intended or written to be used, and cannot be used, for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code.

Copyright © Smithers Law Group, LLC 2024

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