The Federal Corporate Transparency Act Requires Most Business Entities in the U.S. to File Ownership Disclosures with the Department of the Treasury Before December 31, 2024
In January of this year we sent you an important notice concerning new federal reporting requirements for certain companies doing business in the United States that became effective in 2024. We are reaching out to you again to remind you that the deadline to file the required ownership disclosures is fast approaching and that if you have not already filed your disclosures you need to act immediately to make sure you meet the December 31, 2024 filing deadline for companies formed or registered before January 1, 2024.
The Act: In 2021, Congress enacted the Corporate Transparency Act. This law requires business entities created and/or operating in the U.S. to file a report with the Department of the Treasury providing information concerning the beneficial owners of the entity. This reporting requirement was created as part of the U.S. government’s efforts to make it harder for bad actors to hide or benefit from their ill-gotten gains through shell companies or other opaque ownership structures.
Who is Required to File: Your company may be required to file a report if it is:
1. A corporation, a limited liability company (LLC), or was otherwise created in the United States by filing a document with a secretary of state or any similar office under the law of a state or Indian tribe ; or
2. A foreign company and was registered to do business in any U.S. state or Indian tribe by such a filing.
Because sole proprietorships, trusts, and general partnerships do not require the filing of a formal document with the Secretary of State, they generally are not considered a reporting company and will not have a filing requirement.
Exemptions: Congress has created 23 categories of entities that are exempt from the registration requirement; however, most non-publicly traded entities with less than 20 full-time employees and less than $5,000,000 in gross receipts or sales will be required to report. Of particular interest to you may be the exemption for large operating companies. A large operating company is any entity with (a) more than 20 full-time US employees, (b) an operating presence at a physical office within the US, and (c) more than $5,000,000 of US-sourced gross receipts reported on its prior year federal income tax return. If you meet these qualifications, you are not subject to the new reporting requirements.
What Information Must be Provided: Information must be reported for the reporting company’s “beneficial owners”. The information required includes each beneficial owner’s full legal name, date of birth, street address, and a unique ID number. The unique ID number can be the beneficial owner’s non-expired US passport number, state driver’s license number, or the identifying number from another form of government-issued ID card. A non-expired foreign passport number may also be used. An image of the document bearing the unique ID number must also be up-loaded and submitted with the report.
Who are Beneficial Owners: Beneficial owners of a company are (1) any individual who directly or indirectly owns or controls at least 25% of the ownership interests of the reporting company; or (2) any individual who exercises substantial control over the reporting company. Individuals with substantial control are individuals with substantial influence over important decisions of the reporting company’s business, finances, and structure. Presidents, CEOs, CFOs, general counsel, COOs, any other officers who perform similar functions, and any individual with the authority to appoint or remove the reporting company’s senior officers or board members are automatically deemed to have substantial control. Please keep in mind that there is no requirement that these individuals have ownership in the company to be considered a beneficial owner for reporting purposes.
When is the Deadline to File: Any entity created or registered prior to January 1, 2024 will be required to file its report on or before December 31, 2024. For reporting companies created or registered in 2024, the initial report is due 90 days after the entity’s creation or registration. For reporting companies created or registered after 2024, the initial report is due 30 days after the entity’s creation or registration.
Penalties for Failure to Timely File: Failure to timely file a report may result in a $500 per day fine. A willful failure to file a report or a willful filing of false information may result in up to two years of imprisonment and a fine of up to $10,000.
The experienced business attorneys at Plakas | Mannos can help you determine if you are required to file a registration and can complete and file all required forms on your behalf to ensure that you are in compliance with federal law. Please be advised that if you desire Plakas | Mannos to help you determine if you are required to file a registration and/or file the registration on your company’s behalf you must contact Plakas | Mannos and expressly retain it for this purpose. Plakas | Mannos will not provide you any advice as to whether your company is required to file a registration or file a registration on your company’s behalf unless and until you have expressly retained Plakas | Mannos in writing to do so. In order to ensure sufficient time to complete your company’s filing prior to the year-end deadline, we ask that you contact us before October 31, 2024 if you desire to retain us to file the registration on your company’s behalf.
If you would like to retain us to assist you in complying with the Corporate Transparency Act, please call Plakas Mannos at 330-455-6112.
Share This Story, Choose Your Platform!
