Content by Bill Richter

Officers, directors, founders, prospective founders, investors, trustees and anyone who exercises control in a legal entity – get ready to deal with the Corporate Transparency Act!  

Under the CTA, an estimated 32 million companies, including yours, will need to file with the Financial Crime Enforcement Network (FinCEN) personally identifiable information of individuals who have at least a 25% ownership interest or substantial control (think officers, directors, shareholders with certain governance rights, etc.) over your venture.

If you are on the fence about whether to incorporate your venture (or form your LLC) before year-end, or to wait until 2024, you can thank the good folks in Washington who adopted certain amendments to the 2021 National Defense Authorization Act for making this decision a no- brainer. Whoa – how does that compute? The Corporate Transparency Act (“CTA”) contained in these amendments comes into effect on Jan. 1, 2024, mandating the creation of a national database of beneficial owners of legal entities (including trusts and funds) to prevent the use of anonymously owned entities for illegal purposes (including preventing another 9/11).

Under the CTA, an estimated 32 million companies, including yours, will need to file with the Financial Crime Enforcement Network (FinCEN) personally identifiable information of individuals who have at least a 25% ownership interest or substantial control (think officers, directors, shareholders with certain governance rights, etc.) over your venture.

If your entity is in existence before January 1, 2024, you will have until January 1, 2025 to make this filing; but if you wait to form your entity until January 1, 2024, your filing obligation kicks in 90 days after formation. The filings are going to be tricky and time-consuming – and willful failures to file, or the willful provision of false or fraudulent information, or the willful failure to file complete and accurate reports (as well as updates whenever personal information changes) is punishable by civil fines of $10k (plus $500/day) as well as 2 years imprisonment.

Stay tuned for my upcoming SCW presentation on what is being described as the largest change in business practice since the advent of the LLC. This is going to change almost everything.