Understanding the Corporate Transparency Act’s Reporting Requirements

By: White & Claassen LLC

Overview: The Corporate Transparency Act, introduced in 2021, aims to enhance transparency in business ownership to combat money laundering. Starting in 2024, new reporting requirements will impact an estimated 32 million small business entities.

Who Needs to Report?

  • Reporting Companies: This includes small corporations, limited partnerships, LLCs, and limited liability partnerships that are registered with state offices. Single-member LLCs formed for business or owning a rental property are also included. However, it generally excludes general partnerships unless state law requires registration. Tax-exempt entities are not required to report.

  • Exemptions: Self-employed individuals without an LLC or corporation, most general partnerships, and certain other regulated industries are exempt.

Information Required:

  • Reports are submitted online to the Department of the Treasury’s Financial Crimes Enforcement Network (FINCEN).

  • Must include details of "beneficial owners" – individuals who control 25% or more of the entity or have substantial control (like senior officers such as the CEO, CFO, COO).

  • Required information: Name, birth date, address, and identification number (SSN or ITIN).

Deadlines:

  • Existing Entities: Must file by January 1, 2025.

  • New Entities Formed in 2024: File within 90 days of formation.

  • Entities Formed in 2025 and Beyond: File within 30 days of formation.

  • Changes to company information must be reported within 30 days.

Penalties for Non-Compliance:

  • Civil penalties up to $500 per day, capped at $10,000.

  • Potential criminal penalties, including up to two years of imprisonment for willful violations.

Exceptions:

  • 23 specific exceptions exist, mainly for already regulated industries like utilities and banks.

  • Large operating companies (those with over $5 million in revenue, 20+ full-time employees, and a U.S. location) are broadly exempt.

How to File:

  • Forms and electronic filing options are available on the FINCEN website.

Need Help?

  • For most, reporting will be straightforward. Guidance is available on the FINCEN website.

  • For complex cases, like determining beneficial ownership or exemptions, consulting a licensed attorney is recommended.