Posted on December 22, 2023, by Starlett Massey
In 2021, the Federal government enacted the Corporate Transparency Act (“CTA”) to enhance transparency in corporate entity structures and require the disclosure of the identity of the individuals who own and control U.S. companies to better arm the federal government in its fight against money laundering, tax fraud, terrorism funding, and other illicit activities.
Every business owner needs to educate themselves on the steps needed to prepare for and comply with the CTA. We recommend that companies utilize the resources provided by their legal counsel and CPA to ensure compliance and that they satisfy the reporting requirements timely, accurately, and in good faith.
The Financial Crimes Enforcement Network of the U.S. Department of the Treasury (“FinCEN”) will operate the portal where your private information will be stored. FinCEN will store this information in a centralized database and only share your information with authorized users for purposes specified by law1. FinCEN’s database “will use rigorous information security methods and controls typically used in the Federal government to protect non-classified yet sensitive information systems at the highest security level.”2
For companies in existence as of December 31, 2023, the companies, owners, and controlling persons must report to FinCEN on or before January 1, 2025.
For companies formed on or after January 1, 2024, the compliance deadline is within 90 days of formation.
For companies in existence as of December 31, 2023, that are terminated after January 1, 2024, these companies will still be subject to the compliance deadline of January 1, 2025.
With some exceptions, all companies that are registered with the Florida Division of Corporations, including:
Not only must the company itself obtain a FinCEN Identifier and report to FinCEN, but each individual who is a Beneficial Owner of the company and/or a Company Applicant for the company must report. We recommend that each individual reporter obtain their own FinCEN Identifier and link to the company’s FinCEN Identifier to streamline compliance with the reporting compliance.
A company’s Beneficial Owner includes every individual who owns or controls at least 25% of a company or has “substantial control” over the company.
A company’s Company Applicant is the individual who files or is responsible for the filing of the document that registers the company with the state, e.g., the administrator, attorney, or CPA for the company that formed the company with the Florida Division of Corporations.
Because the determination of which individuals are Beneficial Owners of a company is, to some degree, a legal decision, we recommend that our clients seek the professional guidance of counsel before completing their reporting to FinCEN. At Massey Law Group, P.A., we recommend that we undertake a detailed review of our business owner clients’ corporate structure, governing documents, and controlling persons to ensure that reporting is handled correctly. Because the CTA also requires updates upon the change of any information for a Beneficial Owner or Company Applicant, e.g. a change in home address, we will also provide customized guidance to our clients on how to implement the appropriate controls and systems to ensure that the mandatory reporting is handled on a going-forward basis.
Each company must provide the following information for the individual Beneficial Owners and Company Applicants:
The penalties for non-compliance are severe, even where the failure to report, failure to report timely, or failure to report accurately was made in good faith. Practitioners are adopting the approach of, “When in doubt, report” to protect their clients from FinCEN’s onerous penalties. The penalties are indeed severe:
For more information about the CTA and your company’s FinCEN reporting requirements, download the Small Entity Compliance Guide here.
To schedule an appointment to review your company’s structure and set yourself up for successful, timely, and accurate reporting or retain Massey Law Group, P.A. to perform your company’s CTA reporting, please contact us today.
1Small Entity Compliance Guide, Beneficial Ownership Information Reporting Requirements, Version 1.0 September 2023, published by the Financial Crimes Enforcement Network, U.S. Department of Treasury, p. v.
3Most, but not all, not-for-profit corporations will qualify for exemption 19 as tax-exempt entities. See, id., at p. 4, 11.
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