Starting January 1, 2024, there’s a new law called the Corporate Transparency Act (CTA) that aims to stop illegal activities involving corporate vehicles. This law makes it necessary for new and smaller companies in the US, as well as foreign companies operating in the US, to tell FinCEN (a financial agency) about the people who control their company. These companies, called Reporting Companies, need to disclose this info, but some are exempt.
Companies formed before January 1, 2024, have until January 1, 2025, to share this information. Companies created after January 1, 2024, have 30 days from when they officially register to share it.
According to the CTA, a “Beneficial Owner” is someone who has a big say in how a company runs or owns at least a quarter (25%) of it. Some companies don’t have to share this info and are exempt:
- publicly-traded corporations
- certain Pooled Investment Vehicles that have claimed and exemption from registration pursuant to Section 3(c) of the Investment Company Act and are managed by a bank, credit union, registered broker-dealer, registered investment adviser, or venture capital adviser
- certain larger US-based companies that have more than 20 employees and can demonstrate $5,000,000 of gross receipts or sales in its previous fiscal year
- shell companies that are inactive and has not received funds greater than $1,000 in the preceding 12-month period, and other entities as exempted under the CTA.
Syndications, and Pooled Investment Vehicles (Private funds) may be subject to reporting requirements under the CTA if an exemption is not met.
If a company that’s supposed to share this info doesn’t do it on time, the company or the person in charge might face fines or even legal trouble.
This material is educational material and not to be construed as legal advice. All legal matters may involve further granularities and nuances, please contact a qualified attorney for further information.