Question 1

What is the new law?

Accepted Answer

In 2021, Congress passed the Corporate Transparency Act (“CTA”) which takes effect in 2024.[1] (https://manage.wix.com/dashboard/9b2e79d5-4ffe-4185-a3f1-ccd76a87c076/faq-page-bm?compId=lohndg73&origin=gfpp&viewMode=editor&appDefId=14c92d28-031e-7910-c9a8-a670011e062d&origCompId=comp-lohncxd7#_ftn1) The CTA requires certain companies to report information about itself and its owners to the Financial Crimes Enforcement Network division of the U.S. Department of Treasury (“FinCEN”).

[1] (https://manage.wix.com/dashboard/9b2e79d5-4ffe-4185-a3f1-ccd76a87c076/faq-page-bm?compId=lohndg73&origin=gfpp&viewMode=editor&appDefId=14c92d28-031e-7910-c9a8-a670011e062d&origCompId=comp-lohncxd7#_ftnref1)31 U.S.C. §5311 et. seq.; 31 C.F.R. §1010.100 et. seq.

Question 2

Who does the law impact?

Accepted Answer

The law requires “reporting companies,” to provide information about themselves, their “beneficial owners,” and their “company applicants.”

Question 3

What is a "Reporting Company"?

Accepted Answer

Domestic Companies: Corporations, limited liability companies, and other entities created by filing with the secretary of state or a similar state or tribal office.

Foreign Companies: Corporations, limited liability companies, and other entities formed under foreign law, registered to do business in a state or tribal jurisdiction.

Exemptions: The law exempts 23 types of entities from reporting, including companies that report to the SEC, banks, investment companies, insurance companies, accounting firms, and tax-exempt entities.  Also, the law exempts “large operating companies” which are companies with (i) more than 20 full-time employees in the U.S., (ii) physical operations in the U.S., and (iii) more than $5 million in gross receipts or sales.  Please see 31 U.S.C. §5336(a)(11)(B) and accompanying regulations for a full list.  See regulations here.(https://www.govinfo.gov/content/pkg/USCODE-2020-title31/pdf/USCODE-2020-title31-subtitleIV-chap53-subchapII-sec5336.pdf; https://www.fincen.gov/sites/default/files/shared/31_CFR_1010_380_excerpt_from_Final_Rule.pdf)

Question 4

What is a "Beneficial Owner"?

Accepted Answer

A beneficial owner is an individual who (i) exercises substantial control over the entity or (ii) owns at least 25% of the ownership interests of the entity, subject to exceptions.

Ownership Interest: The CTA defines ownership interest broadly and includes equity, stock, capital interest, profit interest, and other instruments.

Substantial Control: FinCEN rules direct that an individual has substantial control of a company if she (i) is a senior officer, (ii) has authority to appoint or remove senior officers or a majority of the board of directors, (iii) has substantial influence over important decisions, or (iv) has any other form of substantial control.

Question 5

What is a "Company Applicant"?

Accepted Answer

A company applicant is the individual who files a company’s formation documents.

Question 6

What must be reported?

Accepted Answer

All reporting companies must file an initial report with the following information:

• Each reporting company must report about itself:
   1. The company’s full legal name;
   2. The company’s trade name or “doing business as” (d\b\a) name; 
   3. The company’s address or primary U.S. location (foreign companies);
   4. The jurisdiction of formation and registration; and
   5. The company’s Taxpayer Identification Number (including its Employer Identification Number) with the IRS.

• Each reporting company must report about each of its beneficial owners: 
    • The owner’s full legal name;
    • The owner’s date of birth;
    • The owner’s address;
    • A unique number identifying the owner and an image of the document from which the number is taken, options being:
       •  a non-expired U.S. passport,
       • a non-expired state or tribal I.D.,
       • a non-expired driver’s license, or 
       • a non-expired foreign passport if none of the above are available.

• Only reporting companies formed after January 1, 2024 must report company applicants.

Question 7

What is the continuing obligation?

Accepted Answer

Reporting companies have a continuing obligation to report changes to FinCEN, including changes in beneficial owner information (e.g., death, name, address, or driver’s license number).  Reporting companies must report changes within 30 calendar days.  Also, exempt-companies that lose their exemption must begin reporting within 30 days.

Question 8

What is the penalty for not complying?

Accepted Answer

Failing to comply with CTA reporting requirements can result in civil and criminal penalties.  A person who willfully files a false report or willfully fails to file a report is subject to a civil penalty of up to $500 per day for each day the violation continues, and criminal penalties of up to $10,000 and two years’ imprisonment.

Question 9

How can business owners comply with the CTA?

Accepted Answer

FinCEN began accepting reports on January 1, 2024.  If you would like to report for your company under the CTA without assistance from Payne & Jones, you can find more information on the Beneficial Ownership Information Reporting page on FinCEN’s website.(https://www.fincen.gov/boi)  If you would like Payne & Jones to assist you, please contact your attorney directly.

CORPORATE
TRANSPARENCY ACT

Please note: The Corporate Transparency Act is undergoing legal challenge in the federal court system. Compliance with the Corporate Transparency Act is voluntary at this time.
Please contact cta@paynejones.com or call 913-469-1221 with specific questions.

CORPORATE TRANSPARENCY ACT

Please note: The Corporate Transparency Act is undergoing legal challenge in the federal court system. Compliance with the Corporate Transparency Act is voluntary at this time. Please contact cta@paynejones.com or call 913-469-1221 with specific questions.

CORPORATE
TRANSPARENCY ACT

Please note: The Corporate Transparency Act is undergoing legal challenge in the federal court system. Compliance with the Corporate Transparency Act is voluntary at this time.
Please contact cta@paynejones.com or call 913-469-1221 with specific questions.