Corporate Transparency Act Takes Effect- January 19, 2024

Effective January 1, 2024, roughly 32 million reporting companies must begin reporting specific information about their beneficial owners as well as company applicants to the Financial Crimes Enforcement Network (“FINCEN”). This new initiative is part of the Corporate Transparency Act  (“CTA”), which was passed by Congress to combat various illegal activities including but not limited to securities fraud, human and drug trafficking, and money laundering.

The primary goal of the CTA is to weed out those who are concealing the ownership of business entities through shell companies that facilitate illegal activities. The CTA broadly applies to “reporting companies”, which includes any corporation, limited liability company, or other entity that is created by filing a document with the Secretary of State or similar office, as well as any foreign company that has registered to do business. Furthermore, the CTA reporting requirements apply to “beneficial owners” of an entity, which includes any individual who directly or indirectly owns or controls 25% or more of equity in an entity or exercises substantial control of an entity.

Those who are implicated under the reporting requirements of the CTA must timely file reports with FINCEN. Failure to do so can result in severe penalties. Details of the filing requirements can be found at the FINCEN website and in their Small Entity Compliance Guide.

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As always, please do not hesitate to contact our attorneys with any of your questions. You can reach us by replying to this e-mail or calling our office at (631) 683-8700. Please note, since each entity’s compliance requirements are based upon their specific facts and circumstances, a written engagement agreement will be required before we can provide advice or guidance.