After years of delays, the Corporate Transparency Act (CTA) goes into effect on January 1, 2024. It imposes a new federal filing requirement for many corporations and limited liability companies (LLCs). The CTA’s purpose is to prevent the use of anonymous shell companies for money laundering, tax evasion, and other illegal purposes.
The CTA does not apply to all businesses. It applies only to entities such as corporations, LLCs, and others formed by filing a document with a state secretary of state or similar official. It doesn’t apply to sole proprietors.
Some businesses are exempt, including
large businesses—businesses with more than 20 full-time employees and $5 million in receipts on their prior-year tax return,
certain businesses already heavily regulated by the government, such as banks and insurance companies,
nonprofits, and
several others.
The CTA’s purpose is to compile a massive government database containing the identities and contact information of the “beneficial owners” of most types of business entities. Beneficial owners are the humans who own or exercise substantial control over the entity.
For most reporting companies, identifying the beneficial owners is simple. For example, a three-member LLC in which each member has a one-third ownership interest has three beneficial owners. Identifying beneficial owners for reporting companies with complex ownership structures can be more difficult.
The CTA's reporting requirements will be phased in two stages:
All new reporting companies - those formed on or after January 1, 2024, must report the required information within 30 days after their formation.
All existing reporting companies - those formed before January 1, 2024 must report no later than January 1, 2025.
If you do not meet one of the exceptions, this is something you must do. The penalty for non-compliance is $500 per day.
Note we have learned this is considered a legal matter and are prohibited from providing this service. We are working with some attorneys who will be able to file this for you. Of course you can use your current attorney or attempt to do it yourself.
Questions?
As always, contact TrueBlaze Advisorsso we can answer any questions or discuss how the CTA may impact your business.