New Disclosure Requirements for Private Business Owners
Important Information for Our Clients:
The U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) has introduced new disclosure requirements under the Corporate Transparency Act (CTA), impacting private business owners. This document outlines the essential information, including compliance obligations, deadlines, and penalties.
Key Details of the Corporate Transparency Act (CTA)
The CTA mandates that certain companies disclose information on their beneficial owners and company applicants to FinCEN. These requirements affect entities such as corporations, limited liability companies (LLCs), limited partnerships, and similar structures.
Exemptions:
Currently, trusts (excluding statutory trusts) and general partnerships are exempt from this requirement, as they do not undergo the same state filing processes. However, if an entity does not qualify for these exemptions, it must report detailed information on its beneficial owners.
Defining Beneficial Owners:
A beneficial owner is any individual who directly or indirectly exercises substantial control over a reporting company or owns or controls at least 25% of its ownership interests. This includes:
Trustees with authority over trust assets.
Beneficiaries entitled to income or principal distributions.
Grantors with revocation rights over the trust.
For entities meeting the 25% ownership threshold, identifying beneficial owners is crucial for CTA compliance.
Company Applicants:
Reporting companies formed or registered in the U.S. on or after January 1, 2024, must disclose identifying information of company applicants within 30 days of formation or registration (90 days for companies formed earlier in 2024). A company applicant includes anyone who directly files the formation or registration documents or is responsible for directing or controlling the process.
Required Information for CTA Reporting
When reporting to FinCEN, each reporting company must provide:
Full legal name, trade name (if any), and business street address.
Jurisdiction of formation or registration.
U.S. or foreign taxpayer identification number.
For beneficial owners and company applicants, the required information includes:
Full legal name, residential address, and date of birth.
Unique identification number from a government-issued document (such as a passport or driver’s license), along with a copy of that document.
If there are changes in beneficial ownership or other reportable details, the reporting company must file an updated report within 30 days.
Deadlines and Penalties
Timeframes for reporting are as follows:
Reporting companies in existence before January 1, 2024, must file their initial reports within one year.
Companies created during 2024 must report within 90 days of registration.
Companies formed after 2024 must report within 30 days of formation.
Failure to comply with these requirements can result in substantial penalties, including fines of $500 per day, up to $10,000 in total, and potential imprisonment of up to two years.
For guidance on complying with these new requirements or for assistance with CTA filings, please contact us at Ventu Business Tax Solutions Inc. Our team is dedicated to helping you navigate these changes and ensuring your business remains compliant.