The Corporate Transparency Act (“CTA”), a new federal filing requirement for many business entities, became effective on January 1, 2024.  The CTA was enacted as part of the Anti-Money Laundering Act of 2020 to provide Federal and State enforcement agencies with more comprehensive information about small and shell companies to help control money laundering and terrorist financing activities.  The database of information provided by the CTA Reports will not be available to the general public but will be accessible by Federal and most states’ criminal and financial law enforcement agencies.

In general, the businesses subject to the CTA reporting requirements (“Reporting Companies”) are required to report specified information about the Reporting Company and the Reporting Company’s information beneficial owners to the Financial Crimes Enforcement Network (“FinCEN”).

Businesses subject to the CTA reporting requirements (“Reporting Companies”) are those set up as a corporation, limited liability company, limited partnership, certain types of business trusts, and a few unusual other types of entities.  General partnerships and proprietorships are not subject to CTA reporting requirements.  As smaller businesses are the focus of the CTA, a business that meets all three of the following criteria—or, the criteria of other specific exceptions—will NOT be required to file a CTA Report:

(a) the business reported over $5 Million in gross receipts on its last filed U.S. Tax return;

(b) the business has more than 20 full-time employees in the U.S.;

(c) the business has an operating presence at a physical office in the U.S.

CTA Reports will be filed electronically with FinCEN, a division of the U.S. Treasury Department.  There is no charge for filing a CTA Report or an amended CTA Report.  The deadline for a Reporting Company to file its initial CTA Report is dependent on when the Reporting Company was created as shown in the following table:

COMPLIANCE DEADLINE FOR INITIAL CTA REPORT
Reporting Companies formed prior to January 1, 2024On or before January 1, 2025
Reporting Companies formed in the year 2024Within 90 days of formation
Reporting Companies formed after December 31, 2024Within 30 days of formation

As information in the CTA Report becomes inaccurate or out-of-date, each Reporting Company is required to file a new CTA Report within 30 days with accurate and current information.

The CTA Report must contain specific information about the Reporting Company.  This information includes the full company name, any trade names or DBAs, principal address, and IRS taxpayer identification number.  In addition to the Reporting Company’s information, the CTA Report must also include the specified personal information of the Reporting Company’s ownership, each referred to as a “Beneficial Owner”.

The information required to be reported for each Beneficial Owner is such individual’s full name, date of birth, residential address, and government-issued identification.  An individual qualifies as a Beneficial Owner if they directly or indirectly own more than 25% of the equity of the Reporting Company or have substantial control of the Reporting Company.  Individuals with substantial control may include officers, managers, directors, equity holders with preferential rights in the Reporting Company, or others with effective control over the Reporting Company. For newly-formed Reporting Companies, the specific personal information must also be provided for individuals directing the formation of the Reporting Companies.

Please note that if your company is required to file a CTA Report there are potentially severe penalties that may be assessed, including fines, civil penalties and criminal penalties.  Thus, we strongly encourage you to designate a trusted person to review this letter, research and understand the CTA’s application to your company, and be prepared to file the CTA Report well prior to your company’s filing deadline.

Resources:

Weintraub CTA Compliance Team:

If you have any questions relating to the CTA or need assistance in determining how to prepare for this new filing requirement, please do not hesitate to contact your counsel at Weintraub Tobin or any member of Weintraub Tobin’s CTA compliance team identified below, and they would be happy to assist you.

Weintraub Client Webinar:

Weintraub attorneys Jeanne Vance and Anders Bostrom will present An Overview of the Corporate Transparency Act via webinar on Wednesday, February 21 at 9 am PST. There is no charge for the webinar, but registration is required. To attend, please register here.

Ongoing CTA updates: Email List:
If you would like to receive updates and information on future educational resources about the Corporate Transparency Act, please sign up here.