Navigating the Corporate Transparency Act: What Property and Business Owners Need to Know
The Corporate Transparency Act (CTA), a significant component of the Anti-Money Laundering Act of 2020, introduces new ownership information reporting requirements for small businesses, particularly those holding assets in LLCs, LLPs, LPs, or corporations. This legislation aims to enhance transparency and combat illicit activities by requiring these entities to report beneficial ownership information to the Financial Crimes Enforcement Network (FinCEN). As a business owner and/or as a property owner, you must understand this new law and how it impacts you.
Understanding the Corporate Transparency Act and its Key Reporting Requirements
The CTA mandates that affected entities disclose the identities of their beneficial owners. Beneficial owners are individuals who ultimately own or control the entity. Required reporting information includes details such as:
Name
Date of birth
Address
An identification number
This is done through a Beneficial Ownership Information Report (BOIR) submitted to FinCEN.
What is FinCEN?
The Financial Crimes Enforcement Network (FinCEN) operates as a vital arm of the United States Department of the Treasury, the national treasury and finance department of the United States government. FinCEN plays a crucial role in safeguarding the nation's financial system from illicit activities. With a mission to combat money laundering, terrorism financing, and related crimes, FinCEN employs strategic financial authorities and robust intelligence gathering techniques. Its primary objectives include promoting national security through the meticulous analysis, collection, and dissemination of financial intelligence. By monitoring financial transactions and enforcing regulations, FinCEN strives to maintain the integrity of the financial system, protecting it from exploitation and preserving economic stability.
CTA Reporting Process
Entities subject to the CTA can fulfill their reporting obligations through the FinCEN website: fincenid.fincen.gov. This platform allows entities to submit their required information online.
What Companies Have to Report to FinCEN Under the Corporate Transparency Act?
There are two main categories of companies obligated to disclose beneficial ownership information to FinCEN:
Domestic reporting companies
Foreign reporting companies
Domestic reporting companies include corporations, limited liability companies, and any other entities established through the filing of documentation with a secretary of state or similar office within the United States.
On the other hand, foreign reporting companies comprise entities formed under foreign law but have registered to conduct business within the United States through filing with a secretary of state or equivalent authority.
What Companies Are Exempt from CTA?
It's important to note that there are 23 types of entities exempt from these reporting requirements:
Securities reporting issuer
Governmental authority
Bank
Credit union
Depository institution holding company
Money services business
Broker or dealer in securities
Securities exchange or clearing agency
Other exchange act registered entity
Investment company or investment adviser
Venture capital fund adviser
Insurance company
State-licensed insurance producer
Commodity exchange act registered entity
Accounting firm
Public utility
Financial market utility
Pooled investment vehicle
Tax-exempt entity
Entity assisting a tax-exempt entity
Large operating company
Subsidiary of certain exempt entities
Inactive entity
Corporate Transparency Act Deadlines and Penalties
The reporting requirements only came into effect as of January 1, 2024. Deadlines for reporting can vary, and it's crucial to stay updated via the FinCEN website. Entities formed before the enactment of the CTA might have a different reporting timeline than those established after. Non-compliance can result in significant penalties, including hefty fines and potential legal repercussions.
Implications for Your Holdings
If you own rental properties or businesses through entities like LLCs, understanding and complying with the CTA is essential. Non-compliance could lead to penalties, affecting your business operations and financial standing.
Act Now and Stay Informed with Rilus Law
Take proactive steps to review your business structure and prepare to report the necessary information with FinCEN’s BOI report. Consult with legal professionals to ensure compliance and understand the nuances of the CTA, especially if you’re not sure if you are a reporting company or not.
As property and business owners, understanding and complying with the Corporate Transparency Act are essential for safeguarding your interests and maintaining regulatory compliance in an evolving legal landscape. For detailed information and updates, regularly visit the FinCEN website and stay connected with Rilus Law for expert legal guidance.