It is well-known in some circles that the United States is actually the largest tax-haven in the world. While not for US person, for non-US persons this is undoubtedly true. Part of the reason for this is that several states in the US actually do have laws which enable the creation of companies without disclosing who owns them. The benefit of this type of "privacy" has always been suspect in my opinion, and the new Corporate Transparency Act (CTA) likely puts a nail in that coffin.
The CTA is a law enacted in the United States in January 2021 as part of the National Defense Authorization Act (NDAA). The law was designed to enhance corporate transparency by requiring most U.S. corporations and LLCs to disclose their beneficial ownership information to the Financial Crimes Enforcement Network (FinCEN), a bureau of the US Department of the Treasury.
Under the CTA, companies that are defined as "reporting companies" must report to FinCEN the identities of their “beneficial owners”, who are individuals who, directly or indirectly, own 25% or more of the company's ownership interests or who exercise substantial control over the company. The information that must be reported includes the beneficial owner's name, address, date of birth, and other identifying information.
The law aims to prevent the use of shell companies for illegal activities such as money laundering, terrorism financing, and other financial crimes. By requiring companies to disclose their beneficial ownership information, the law makes it more difficult for individuals to hide their identities behind shell companies and carry out illicit activities.
Overall, the Corporate Transparency Act is seen as an important step in promoting corporate accountability and reducing financial crime in the United States.
For many Lodmell & Lodmell clients this Act has direct impact; however, there may still be reporting requirements for your LLCs and other companies. We suggest that you work with your CPA to determine which of your companies is required to file. Since this act is primarily directed at small companies, it is likely that you will need to file some reporting.
You can report your entities here. For a step by step guide of how to report your entities, read through this article: CTA Step-by-Step Process.
For companies created after January 1, 2024, you will have 90 days to file the report. Any entities created on or after January 1, 2025 must be reported within 30 days of creating the entity.
For any companies already in existence, you must file their first report by January 1, 2025.
Following the initial report, if there are any corrections or changes in ownership, a new report must be filed within 30 days of the correction or change. Otherwise, there is no ongoing filing requirement. Some changes that would require a new filing include a change of address, change in senior management, or when an owner has died, and the business interests pass on to new beneficiaries.
This applies to all LLCs and companies, not just those in privacy jurisdictions like WY. Failure to timely submit the reports can result in civil and criminal penalties. These penalties include civil penalties up to $500 per day, and criminal penalties in the form of fines up to $10,000, imprisonment of up to two years, or both.
That being said, it is crucial to be aware of the new reporting obligations and to begin the steps to be in compliance.
The information required is:
COMPANY:
Full Legal Name
Trade Name
Street Address
Jurisdiction of Formation
IRS EIN number
BENEFICIAL OWNERS (directly or indirectly has control or owns 25%):
Full Legal Name
DOB
Current Address
ID number such as a passport or drivers license.
Image of document with ID
For a link to the final rule promulgated on September 30, 2022 by FINCEN you can click here.
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