Corporate Transparency Act Registration Starts January 1, 2024

The Corporate Transparency Act is a law that was passed in 2021 to address ownership transparency, and it becomes effective January 1, 2024. The Corporate Transparency Act was passed to enhance transparency of corporate ownership and structure and to prevent money laundering, tax fraud, and other criminal activities. The law requires a business that has filed paperwork with their Secretary of State or other Corporation Commission to report beneficial ownership of the company. This Corporate Transparency Act Registration Requirement includes corporations, limited liability companies, and limited liability partnerships. The Corporate Transparency Act mainly requires small businesses to report the required information.

Company registration opens on January 1, 2024.

• Companies that are in existence ass of January 1st will be required to file within one year of that opening date.
• Companies that register with their respective states on or after January 1, 2024, must register within thirty (30) days of receiving an acceptance letter from the state.
• If an entity falls into one of the exceptions identified below but falls out of the exemption, they will be required to file within thirty days.

The “Beneficial Owner” of a company will be required to report the following information: (1) full legal name; (2) date of birth, (3) current residential or business address; and (4) a unique identifying number from an acceptable identification document (passport or drivers’ license) FinCEN identifier.  In addition, information regarding the company and the applicant who is filing to set up the company will be required to provide information.  According to the law, a Beneficial Owner is someone who has substantial control over the company or who owns a 25% or more interest in the company. Exempt from this description is person who is just a nominee, intermediator, custodian or agent on behalf of another who has substantial control of the company, an individual who is only an employee of the company and whose economic benefit is solely derived from the employment of the company; those who inherit their interest in the company.

There are twenty-four Exemptions from the Corporate Transparency Act Filing Requirement. These exemptions include: securities reporting issuers, governmental authorities, banks, credit unions, depository institution holding companies, money services businesses, brokers or dealers in securities, securities or exchange clearing agencies, other exchange act registers entities, investment companies or advisers, venture capital fund adviser, insurance company, state-licensed insurance producer, commodity exchange act registered entity, accounting firm, public utility, financial market utility, pooled investment vehicles, tax-exempt entities (certain exceptions apply), an entity assisting tax exempt entity, large operating companies-defined as employing at least 21 full-time employees, operating a physical location in the U.S. and has five million in gross receipts in sales, subsidiary of certain exempt entities, inactive entities, and certain other exemptions.

Companies that fail to register will be assessed a penalty of $500 a day until the issue is remedied. In addition, the government can impose additional fines from $10,000 up to 250,000 or imprisonment between two and five years, depending upon the violation.

If you or your company need assistance or legal advice regarding the Corporate Transparency Act or the Corporate Transparency Act Registration Requirement, feel free to reach out to us for help.  Robb Longman’s extensive background in business law, corporate law, and tax law provides Mr. Longman with the ability to advise his clients on all types corporate  issues including the Corporate Transparency Act. Mr. Longman has testified before the Maryland House of Delegates on matters and is currently the Secretary of the American Bar Association’s Tax Section . Mr. Longman regularly works with business and individual clients on all types of corporate and business matters to help them address their legal concerns.