The Corporate Transparency Act (“CTA”) was enacted to prohibit shell companies from hiding the identity of their owners. The CTA becomes effective January 1, 2024, and will require most private businesses to report company ownership information to the Financial Crimes Enforcement Network (“FinCEN”).
The CTA is projected to affect over 32 million existing businesses and millions of businesses formed each year. If an entity is formed by filing documentation with an applicable Secretary of State, whether it be a corporation or a limited liability company, then the company likely must comply with the CTA.
KMK Law has a multi-disciplinary Corporate Transparency Act Team to help your company understand and maintain CTA compliance. Please reach out to a member of KMK’s CTA Team to help understand your company’s CTA reporting obligations, CTA deadlines, and reporting information.
Readers will find our most recent insights and analysis under the News & Resources tab on this page. Check back regularly for updates from our team.
What is important to know right now in regards to filing information with FinCEN?
- Entities formed January 1, 2024 or later: Your company must file a report to FinCEN within 90 days of formation.
- Entities formed prior to January 1, 2024: Your company must file a report to FinCEN before January 1, 2025.
- Entities undergoing certain changes in ownership or control: Your company must update the previously filed report within 30 days of the change.
What Information needs to be reported?
Companies formed after January 1, 2024 must report personal information about the company’s “Beneficial Owners” and “Company Applicants” (i.e., the individuals that assisted in forming the company), while entities formed prior to January 1, 2024 must only disclose the company’s Beneficial Owners.
If a company is required to disclose information about its Beneficial Owners or Company Applicants, the following must be disclosed:
- name and birthdate;
- address (residential for Beneficial Owners and business for Company Applicants); and
- a unique identifying number from either a passport or driver’s license and a photocopy thereof.
Who is a Beneficial Owner?
Beneficial Owners are individuals who either directly or indirectly:
- exercise substantial control over a reporting company (ex. CEO, CFO, COO, general counsel, etc.); or
- own or control at least a 25% ownership interest in a reporting company.
FinCEN ultimately wants to know the identity of each person behind a company. This means if you own a company through your ownership in another entity, your identity needs to be disclosed, not the name of a business.
What is the consequence for failing to report?
If the filer of the report willfully provides false information or willfully fails to report, FinCEN could impose civil penalties of up to $500 per day (up to a maximum of $10,000), criminal penalties including a prison sentence not to exceed two years, or both.
The CTA contains 23 exemptions for certain companies that are not required to file, such as public companies registered with the SEC, certain inactive companies, certain large private companies and others.
KMK CTA Team
KMK would like to help your company understand and maintain CTA compliance. Most clients can handle reporting themselves. However, clients with numerous legal entities may face administrative challenges. KMK's CTA team is available to:
- Analyze reporting requirements or available exemptions for your organization.
- Answer your questions as you file your reports.
- Review your reports before you file them.
- Assist in preparing and filing reports and training your staff to handling ongoing reporting.
News & Resources
- KMK Law Corporate & Securities Blog,