If you own or control an LLC or corporation (or certain types of partnerships), a new law called the Corporate Transparency Act (CTA) will soon require that you file a report identifying owners and managers of the entity. The law takes effect in a few short weeks. Contact your THK lawyer for full details of how this may impact your business entity.

As a high-level overview, here are a few questions that THK lawyers have been answering lately:

Does the CTA apply to every small LLC or corporation?
There are very few exceptions. The average small LLC or corporation is included. Medium to large companies (those that have at least 20 full-time employees and more than $5 million in gross receipts), are exempt, as are 501(c)(3) nonprofit corporations.

What kind of report is required?
Each company is required to report “beneficial ownership information” about the owners and individuals who control the company. An owner is anyone who owns 25% or more of the company, either directly or indirectly. A person who “controls” the company is someone who, directly or indirectly, leads, determines, or influences the decisions of the company. This includes officers and managers.

What information is included in the report?
The company itself must report its legal name and any trade names (DBAs) that it uses, along with its addresses and its taxpayer identification number (EIN).

For each beneficial owner, you will need to report the name, address, birthdate, and a unique ID number such as a driver’s license number or passport number (not a Social Security number). You also need to include an image of the document from which that unique identifying number was obtained, including the individual’s photograph. An example would be a copy of your driver’s license.

What is the point of all this?
Congress passed this law to help law enforcement investigate money laundering and other financial crimes. It is intended to prevent bad actors from hiding their identities through the use of shell companies.

When is this report due?
For all existing companies, or those created prior to the end of 2023, the deadline is January 1, 2025.

For all companies created on or after January 1, 2024, the report will be due within 90 days from the date the business is created.

Is there a cost to file this report?
No, there is no charge to file the report.

How do I file the report?
FinCEN (the Financial Crimes Enforcement Network, a division of the U.S. Treasury Department), is creating a website through which you will complete and submit the report. At the time of this article’s publishing, the website is not available yet.

If I have a company that I’m not using for anything, should I dissolve it before the end of this year?
That’s not a bad idea. If the company is dissolved before the end of 2023, it would not be subject to disclosure requirements under the act.

On the other hand, there is an exemption for companies that (a) have no assets at all and (b) have not had any money flowing through them during the past 12 months.

If I’m planning to form a company in early 2024, should I form it before the end of this year?
That’s not a bad idea either. That way your reporting deadline would not be until January 1, 2025.

If I own or operate a number of companies, is there any way to streamline this?
FinCEN will be assigning you a unique identification number, called a FinCEN identifier. Once you have this, it will be simpler to report your information for each entity.

Is there any penalty for failing to file this report?
Yes. If FinCEN finds that you willfully violated the law, you can be fined $500 for each day that the violation continues, up to $10,000, and imprisonment for not more than two years or both.

Will this information be publicly available?
No. But FinCEN is authorized to disclose it to U.S. federal law enforcement agencies and, with court approval, certain other government agencies. FinCEN can also disclose the information to financial institutions if they have received consent from you (as might be included in the small print in forms signed when you open an account) for such disclosure.

Is this a one-and-done report?
No. You are required to keep the information up-to-date. This includes filing an updated report within 30 days after the date on which a change occurs, such as a change in ownership, a change in management, or change in the residential address of a beneficial owner.

This is just a sample of common questions that have arisen. Detailed information regarding the CTA is available through FinCEN at www.fincen.gov/boi. Please note that THK will not be preparing or filing reports with FinCEN, but we are available to answer any legal questions you might have and otherwise guide you on how to manage this, including how you might connect with a third-party service provider who can prepare and file reports for you.

Contact your THK professional for further advice about the Corporate Transparency Act.

James (Jay) M. Lewis, Certified Mediator, Trial Lawyer, Partner, Tuesley Hall Konopa,LLP

Author: Partner James (Jay) M. Lewis, is a business and civil litigation attorney at Tuesley Hall Konopa, LLP. Jay counsels business clients on employment-related matters. He is also a certified mediator and is licensed to practice in Indiana and Michigan.

You can contact Jay by calling 574.232.3538 or by email at jlewis@thklaw.com.

Disclaimer: The THK Legal Blog is for informational purposes only and should not be relied upon as legal advice. In no case does the published material constitute an exhaustive legal study, and applicability to a particular situation depends upon an investigation of specific facts. You should consult an attorney for advice regarding your individual situation. All THK blogs are considered advertising material by the Indiana Bar Association.