SCOPE OF THIS POST: A general orientation, in one place, of this new Federal law, the Corporate Transparency Act (“Act”). I have found that clear basic information is spotty and not easily found. This post is intended to inform general readers of the intent, scope and importance of the Act.
CAVEAT: As readers should know, posts to this site are NOT legal advice and should not be relied upon as a basis for taking or not taking any specific action. This warning is particularly important when it comes to the Act, which becomes effective January 1, 2024. Set forth below are general guides to orient the reader as to the scope of SOME NOT ALL ASPECTS OF the Act. The regulations relating to the Act, and the statutory text itself, are exceedingly complex, depend on detailed analysis of government definitions together with your facts, and you must assume that there are likely to be exceptions to every general statement set forth below. Violation of this law is criminal. The Federal government may amend their regulations under the Act at any time. Talk to your lawyer, CPA or service provider before you take or do not take any action.
GENERAL PURPOSE OF THE ACT: To force criminals to disclose how they hide their money by requiring disclosure of details about businesses they use as a screen and separately criminalizing failure to make such accurate disclosure. Disclosure is to be made on Federal forms required to be filed under the Act.
TIMING: For existing non-exempt businesses formed prior to 1-1-24, a filing must be made during 2024. For entities formed during 2024, filing in 90 days after formation (just expanded from 30 days). For entities formed after 2024–file in 30 days of formation.
WHO FILES: Most typical forms of business must file: corporations, LLCs, limited partnerships. BUT many other forms of entity fall into the “it depends” category, which analysis relates to the actual attributes of the entity. If effecting your actual entity formation required filing with a government agency, you are covered if not otherwise exempt. Certain people who effect the filing with the government on behalf of the company may also have to be disclosed and provide personal information to the government.
WHAT IS DISCLOSED: Names, addresses, identification numbers from passport or drivers license, and picture of document providing that ID number of: 25% equity holders or all persons in actual control of the entity (VERY SUBTLE ANALYSIS–could even be a single director or other non-equity holder). Future changes require filing updates.
WHAT ENTITIES ARE EXEMPT? See above disclaimer, do not rely on below text to conclude you are exempt. The below list is not complete and also covers gross categories subject to detailed specifics not set forth below. Here are possible exempt categories, depending on detailed analysis of facts not necessarily apparent from the below gross descriptions:
Sole proprietorships
Large companies if they have all of: 20 or more full time US employees, a US physical office and a filed Federal tax return showing $5M or more of gross sales receipts
Foreign entities not registered to do business in the US
Banks, insurance companies, broker-dealers, certain investment funds
Tax-exempt entities
CPA firms
Wholly owned subs of an exempt entity
BANK INSTRUMENTS: Banks (subject to definition) must report any transaction involving $3000 or more in at least the following categories: money orders, cashiers checks, travelers checks