Corporate Transparency Act: Does It Apply to You?

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The Corporate Transparency Act (CTA) was enacted by Congress on January 1, 2021, and will be effective as of January 1, 2024, bringing additional reporting requirements for US entities to report to the United States Treasury Department’s Financial Crimes Enforcement Network (FinCEN).

This new legislation will affect all Corporations, LLCs, LPs, LLPs, Business Trusts, and other entities formed or registered in the US, unless the entity is able to satisfy all of the following criteria:

  • More than 20 full-time employees in the US;
  • Operating within the US at a physical office owned or leased by the reporting entity and not shared except with affiliates; and
  • More than $5 million in gross receipts or sales, excluding gross receipts or sales from sources outside the US.

A US entity that is unable to satisfy all criteria above will be classified as a “reporting company.” Under current rules, reporting companies that were in existence prior to January 1, 2024, will have until January 1, 2025, to file their initial reports. Reporting companies that are formed in the 2024 calendar year will have 90 calendar days after formation or registration to file their initial reports; reporting companies that are formed in the 2025 calendar year and beyond will have 30 calendar days after formation or registration to file their initial reports. The House has passed legislation which would delay implementation of these rules until January 2026 for companies in existence prior to January 1, 2024, but the legislation has yet to pass the Senate.

The information that is required to be reported to FinCEN includes basic details about the reporting company, as well as personal information for each beneficial owner and company applicant. A beneficial owner is defined as any individual who exercises substantial control over the reporting company or owns 25% or more of the ownership interest of the reporting company. A company applicant is defined as an individual who files, or directs and controls the filing of, formation or US registration documents of a reporting company after January 1, 2024. Personal information that will need to be reported will be the individual’s Full Name, Date of Birth, Residential Address, and a copy of their Government Issued ID.

Failure to comply with reporting requirements will be met with significant penalties; therefore, it is imperative for you to begin collecting the information required. For more information about the Corporate Transparency Act and how it affects you, please reach out to your DKC representative.

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