January 16, 2024
Although it was enacted in 2021, now is the time to pay attention to the Corporate Transparency Act (CTA). The CTA applies to small businesses and business entities and will reshape the landscape for property owners managing multiple holdings and trusts. This pivotal legislation is aimed at enhancing transparency in ownership structures, impacting property transactions across various sectors. But it’s going to go a lot farther than that. In all, it’s estimated that more than 27 million businesses are now subject to its requirements. And for property owners maintaining their privacy within a LLC, starting January 1, 2024, that privacy may be a thing of the past.
The CTA requires any small private business entity of fewer than 20 employees and with less than $5 million in assets to disclose the identities of its beneficial owners to the Financial Crimes Enforcement Network (FinCEN). “Beneficial owner” includes anyone who exercises control over the company or has a 25% or more ownership stake. If one of those owners is another business, it will also have to disclose the identities of its beneficial owners, and so on. This means that if a trust holds property, it will have to disclose its trustee, and at least some of its beneficiaries.
What kind of information needs to be filed? The business entity must disclose its beneficial owners, while individual beneficial owners must report their name, date of birth, address, and a unique identifier number (such as a passport or driver’s license number) from a government agency, along with a photo of that document. People holding a substantial interest in multiple LLCs will have to report for all of them.
While FinCEN states that all information will be kept confidential, it’s unclear what measures it will take to safeguard information such as passport numbers and dates of birth. It’s also unclear how ownership information will ultimately be used; it’s unlikely to be limited to money laundering investiga
Businesses that were established before January 1, 2024, have one year to comply with the reporting requirements. Newly established businesses will have 90 days to comply. Failure to comply, or late reporting, will subject the business to a penalty of up to $500 for each day the report is late. We therefore suggest that businesses meet their obligations sooner rather than risk missing this deadline.
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