The Corporate Transparency Act (the “Act”) went into effect on January 1, 2024. The Act was passed in 2021 by supermajorities of both the House and Senate in an effort to combat money laundering and domestic terrorism. Under the Act, many entities will be required to report the identity and certain personal information of (1) individuals that directly or indirectly own 25% or more of the entity’s interests, and (2) individuals who directly or indirectly have substantial control of the entity. In addition, entities formed on or after January 1, 2024, and foreign entities first registered to do business in the United States on or after January 1, 2024, will need to identify and report certain personal information about the individuals involved in the entity formation or a foreign entity’s first registration to do business in the United States. The reporting entity will also need to provide certain information about itself. 23 types of entities are exempt from the beneficial ownership information reporting requirements and are listed in the link below. The reported information will be maintained in a federal database that may be shared with state, federal and foreign law enforcement and certain financial institutions.
For an entity already in existence before January 1, 2024, and for a foreign entity that was first registered to do business in the United States before January 1, 2024, the entity must file its initial beneficial ownership information report with FinCEN on or before January 1, 2025. For an entity created or registered on or after January 1, 2024, and before January 1, 2025, the entity must file its initial beneficial ownership information report with FinCEN within 90 calendar days after receiving actual or public notice that the entity’s creation or registration is effective. Specifically, the 90-calendar day deadline runs from the time the entity receives actual notice that its creation or registration is effective, or after a secretary of state or similar office first provides public notice of its creation or registration, whichever is earlier. For an entity created or registered on or after January 1, 2025, the entity must file its initial beneficial ownership information report with FinCEN within 30 calendar days after receiving actual or public notice that the entity’s creation or registration is effective. In addition, after the initial reporting, if there is a change that affects who has 25% or more ownership or control of the entity or there is a change to any previously reported information, that change must be reported within 30 days after the event.
The reporting will be made online with the Financial Crimes Enforcement Network (“FinCEN”), a bureau of the U.S. Department of the Treasury. The regulations regarding what entities must report information required under the Act, how to determine 25% or more direct or indirect ownership or substantial control of an entity, and which of the individuals involved in the formation or registration of entities need to be reported, are complex and too lengthy to summarize in this e-mail. The reporting obligation will affect most small businesses and other entities organized as a corporation, limited liability company, limited partnership, or other form of entity formed by a filing or registered to do business in the United States with an agency of a state (such as the Department of Financial Institutions in Wisconsin or the office of the secretary of state in many other states) or any federal district, territory, commonwealth, possession, or federally recognized Native American Tribe.
You are allowed to use third-party service providers to submit your beneficial ownership information reports. Though our office is not providing a service to submit beneficial ownership information reports, our office is available to answer any questions you may have about the Act. In addition, you might want to engage our office to update certain of your entity governance documents to require that the individuals whose information you are obligated to report will provide that information to you.
There are civil and criminal penalties for not complying with the Act.
The following link will be helpful for more information: https://www.fincen.gov/boi
This communication is informational only and does not create any engagement of Cramer Multhauf LLP to represent you or any entity regarding any reporting obligations under the Act.