Corporate Transparency Act of 2020

25 Jan Corporate Transparency Act of 2020

Authored by:  Attorney Joseph W. Boucher

In January 2021, the US Congress passed the Corporate Transparency Act of 2020  (“CTA”) intending to prevent fraudulent actors from using business entities to launder money and  hide assets. This is a federal law applicable nationwide. It empowers the US Treasury Department through its Financial Crimes Enforcement Network (“FinCen”) Department  to deal with these activities. With this summary we hope to enlighten you as to how the CTA may impact your business.

Note: The law will not be effective until final regulations are implemented, as early as Q1 2022 but more likely later this year or next. Stay tuned.

Under the CTA, all companies will have reporting obligations unless they qualify for an exemption. Exempt companies include regulated entities such as banks, insurance companies, certain accounting firms, and others.

Businesses that do not qualify for another exemption will be required to file these reports unless they have all of the following:

1. More than $5 million in revenue;
2. More than 20 employees; and
3. A physical presence in the US.

These requirements mean that very few small businesses will be exempt, and most will be required to file reports with FinCen naming their “beneficial owners” and the “applicants.”

“Beneficial owners” are essentially individuals who own 25% or more of the company’s equity.

“Applicants” are parties forming the entity including lawyers, law firm staff, and third party vendors.

A non-exempt company formed prior to the effective date will have two years to report its beneficial owners and applicants to FinCen. A non-exempt company formed after the effective date will have 14 days to file this report.

The information for each applicant and beneficial owner

to be reported is:

1. Each person’s full legal name, date of birth, and current residential street address; and
2. Either:
   1. The identification number from an acceptable identification document such as a valid passport, driver’s license, or
   2. a FinCen identifier assigned by FinCen.

We are available to assist you in navigating your obligations under this new law. We are here to help with any questions you may have.

The guidance provided above is general in nature and readers are encouraged to reach out to Neider & Boucher, S.C., or to their own legal counsel to determine the applicability of these issues to their own personal and/or business needs.