January 1, 2023
The Corporate Transparency Act (“CTA”) was enacted by Congress to gather information on most small businesses; such as corporations, LLCs, disregarded entities and partnerships. The CTA is intended to address and safeguard against the use of anonymous shell companies for money laundering, tax evasion, terrorism financing and other forms of illegal financing by mandating certain entities (primarily small and medium size businesses) to report “Beneficial Owner” information. Harding Bell International Inc. is sending you this communication to provide general information regarding the new reporting rules as well as some suggested initial steps you should take to address the implications of the CTA for your organization.
FILING REQUIREMENTS
The CTA is scheduled to require millions of public and private companies (“Reporting Companies”) to report certain information about their entity and about the individuals who directly or indirectly own or control that entity (“Beneficial Owner”). Entities required to comply with the CTA include corporations, limited liability companies and other types of companies that are created by filing with a Secretary Of State. The CTA also applies to non-U.S. companies that register to do business in the U.S.
Information will be reported via a beneficial ownership information report with the Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”). Reporting Companies will be required to submit beneficial ownership electronically through a secure filing system scheduled to start January 1, 2024, although FinCEN is still working to develop their electronic filing system. The CTA authorizes FinCEN to disclose the beneficial ownership information to U.S. and foreign law enforcement, financial institutions, and other regulators under certain limited circumstances.
PHASE-IN OF REPORTING REQUIREMENTS
The CTA’s reporting requirements will be phased-in in two stages:
(1) All new Reporting Companies – those formed (or in the case of non-U.S. companies registered) on or after January 1 2024 must report required information within 30 days after their formation or registration.
(2) All existing Reporting Companies – those formed or registered before January 1 2024 must report no later than January 1 2025.
PENALTIES
The obligation to report falls upon each reporting entity and each beneficial owner. Individuals face civil penalties of $500 per day (up to a total of $10,000), and criminal penalties of up to two years in prison for willful violations of the CTA.
HBI ARE HERE TO HELP
With the CTA introducing a new and expansive reporting regime it is important that you assess the implications of the new rules for your organization. Some questions to consider now are: Is your organization subject to the CTA or do you qualify for an exemption? If not exempt how should you calculate percentages of ownership interests to determine ownership thresholds? How do you assess and determine each person who exercises “substantial control” over the company? What new processes and procedures should be put in place to monitor future changes in beneficial owners that will need to be reported?
We have been monitoring the release of the CTA closely and our team of specialists and advisors are available to assist you with assessing the impact of the CTA on your organization. We strongly encourage you to reach out to us as soon as possible with any questions you might have and recommend you respond to this email and we will send you a letter of engagement for review and signature.
To engage in our service please fill out this PDF and send to: [email protected]
