Your Company Must File a Report with FinCen or Be Fined $500/Day
On January 1, 2021, a new federal law called the Corporate Transparency Act (CTA) became law. This new law applies to almost every corporation, limited liability company and limited partnership formed in the U.S.
How the CTA Affects Your Entity
Here is a brief summary of the CTA:
- All reporting companies must report to the U.S. Treasury’s Financial Crimes Enforcement Net (FinCen) certain required information about the companies’ beneficial owners and its applicant. See the definition of reporting company and the list of companies that are not reporting companies.
- All reporting companies formed after December 31, 2021, must report the required information to the FinCen shortly after the company is formed. We won’t know the reporting deadline until the CTA regulations are finalized.
- All reporting companies formed before January 1, 2022, must report the required information to FinCen not later than two years after the U.S. Treasury finalizes the CTA regulations. The regulations have not been proposed or finalized.
- Almost ALL existing companies and companies formed in the future are or will be reporting companies that must report the required information to FinCen. See the definition of required information.
- A beneficial owner is an individual who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise (i) exercises substantial control over the entity; or (ii) owns or controls not less than 25 percent of the ownership interests of the entity. See the definition of beneficial owner.
- The following is the required information about each beneficial owner and applicant that the reporting company must report to FinCen: (i) full legal name, (ii) date of birth, (iii) current, as of the date on which the report is delivered to FinCen, residential or business street address; and (iv) the unique identifying number from the beneficial owner’s or applicant’s acceptable identification document or the beneficial owner’s or applicant’s FinCEN identifier number. See the definition of required information.
A reporting company that violates the CTA shall be liable to the United States for a civil penalty of not more than $500 for each day that the violation continues or has not been remedied; and may be fined not more than $10,000, imprisoned for not more than 2 years, or both.
- If you have a reporting company you must read my article called “What to Do Now.” This article explains the actions reporting companies need to take now to prepare for the January 1, 2022, effective date of the FinCen reporting requirement.
- To stay up to date on the CTA and its regulations get a free subscription to our CTA newsletter.
To learn more about the Corporate Transparency Act see my CTA website.