New and sweeping disclosure regulations for most all small businesses are coming soon to your door step courtesy of the United States Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”)’s Corporate Transparency Act (“CTA”).

Unlike many federal regulatory disclosure laws which apply primarily to larger businesses, the CTA applies to most every small business including “c” corporations, “s” corporations and limited liability companies as well as other companies formed by filing documents with a state secretary of state.

Information which must be reported and disclosed includes legal and trade names of the business, business address and jurisdiction information as well as US Internal Revenue Service Tax Identification Numbers. In addition, a company must disclose both direct and indirect owners of 25% or more of the business as well as personal information including legal name, date of birth, residential or business address, photo identification and identification number. Definitions of direct and indirect beneficial owners are complex and counsel should be consulted to assure compliance with these provisions.

Failure to file can see penalties of up to $10,000 per day and imprisonment of up to two years.

New Businesses formed after January 1, 2024 must file their beneficial ownership information within 30 days after formation of the entity, however an amendment is pending which would extend this filing period to 90 after formation. In addition to other information, the company applicants or individuals responsible for filing or directing the filing of the business entity must report their information.

Businesses existing prior to January 1, 2024 will have until January 1, 2025 to file their beneficial ownership information.

There are some exemptions to the reporting requirements which include companies which file reports under other reporting structures such as reporting securities issuers, banks, securities broker dealers, insurance companies, public utilities and accounting firms, etc. In addition, large operating companies with more than 20 full time employees and more than $5,000,000 in gross receipts and certain inactive entities are exempt.

There are additional provisions of the law and companies should consult counsel well in advance of the deadline to assure compliance. FinCEN expects of announce additional rules regarding the CTA in the coming months.

Perry Douglas West, Esq.
[email protected]