About the Corporate Transparency Act (CTA)

New Changes to 2024 Business Reporting Requirements

On January 1, 2024, the Corporate Transparency Act (the “CTA”) will take effect the CTA will impose significant new reporting requirements on most small businesses.

The CTA was enacted by Congress as part of its effort to combat terrorism, organized crime, and money-laundering. The CTA requires most entities (referred to as “reporting companies”) to report information about the companies themselves, their beneficial owners, and company applicants (the
persons who signed the formation documents for the entity). It is vital to understand that the law is quite broad and will apply to a vast number of companies, with severe penalties for not accurately and timely reporting required information to the government.

What York Howell Recommends Moving Forward

Entities formed on or after January 1, 2024, and through December 31, 2024, will be required to report no later than 90 days after the entity is formed. Companies formed thereafter have initial filings due no later than 30 days after the company’s formation Reporting information for currently existing entities or entities formed before December 31, 2023, is due before January 1, 2025.

It would be our recommendation that if you are considering creating new entities, that they be prepared and filed prior to the end of the year. If you wait to form the new entity in 2024, the reporting time frame is much quicker. As such, we are strongly recommending creating entities prior to the start of 2024, so you get that additional grace period.

Use This Decision Tree to Decide If Your Business Entity Needs to File Under the CTA

Requirements for Proper Filing

Each reporting company must file its initial report, which must include the following information:

Full legal business name and any trade or “doing business as” name;
Complete address of the company;
- Principal Place of Business (no PO Box);
- Mailing Address;
State of formation;
Date of formation; and
EIN of the business

Additionally, each initial report must include the information of each beneficial owner of the company. The required information of each beneficial owner include:

Full legal name;
Date of birth;
Complete current residential address; and
A unique identifying number from official governmental identification documents (e.g., non-expired passport or government issued driver’s license), and a copy of the document used.

For purposes of the CTA, beneficial owners are not just the persons many would consider to be owners of an entity. A beneficial owner includes any individual who, directly or indirectly, either (i) exercises “substantial control” over a reporting company or (ii) owns or controls at least 25 percent of the ownership interests of such reporting company. Additionally, if a person has substantial control over the entity their information must be provided.

Are You a Reporting Company?

The CTA applies to any entity that qualifies as a “Reporting Company”. A Reporting Company is any entity created by filing a document with
the Secretary of State or similar office as required by the laws of a State, unless otherwise exempt.

Are You a Corporation?

Corporations that are registered to do business in the U.S. meet the definition of a “reporting company” and will be required to disclose certain financial information to FinCEN under the CTA.

Are You a Limited Liability Company?

Limited liability companies that are registered to do business in the U.S. will be required to disclose certain financial information to FinCEN

Are You an Other Similar Entity? The CTA Also Applies to:

Other domestic entities “similar” to corporations and limited liability companies that are created by the filing of a document with the Secretary of State or similar office as required by the laws of a State or Indian Tribe
Foreign entities that are registered to do business in the U.S. by
filing a document with the Secretary of State

If you answered YES to any of these statements, your entity is a Reporting Company.

Do you qualify for an exemption from the CTA?

Are you a Publicly Traded Organization?
Are you a Large Business?
A large business is an entity that operate a physical office in the US and both:
- Employs more than twenty (20) employees on a fulltime basis in the U.S.
- Filed a federal income tax return in the previous year reflecting more than five million dollars ($5m) in gross receipts or sales
Are you a Bank, a Bank Holding Company, or a Federal or State Credit Union?
Are you an Investment Company or Investment Advisor?
Investment companies and investment advisors that are registered with the SEC under the Investment Company Act of 1940 are exempt
Are you a Public Utility?
Public utilities that provide telecommunications services, electrical power, natural gas, or water and sewer services are exempt
Are You an Insurance Company?

Are You a Tax-Exempt Organization?
- Exempt from taxation under section 501 (a) of the internal revenue code of 1986
- A political organization as defined by the internal revenue code
- A trust as defined by such code
Is Your Business Inactive?
An inactive business is one that:
- Has been in existence for over one year
- Is not engaged in active business
- Is not owned (directly or indirectly) by a foreign person
- Has not (in the preceding twelve-month period) had a
  change in ownership or sent or received funds in an
  amount greater than $1,000
- Does not otherwise hold any type of asset including an
  ownership interest in any corporation, limited liability
  company, or similar entity

If you answered YES to any of these statements, your entity is EXEMPT from the CTA.

Steps to Take

The penalties for an entity or beneficial owner failing to report complete or maintain updated beneficial ownership information are severe. There are civil and criminal penalties for violations of up to $500 for each day that the violation continues or has not been remedied, fines up to $10,000, and up to 2 years imprisonment.

There are steps you should take now to minimize or delay any potential CTA filing requirements.

First

If you own interests in old entities that still are in existence but no longer serve a purpose, serious consideration should be given to unwinding those entities prior to December 31, 2023. If the entity is no longer in existence as of January 1, 2024, there will be no reporting requirements for it under the CTA. Please notify us immediately if you would like our assistance dissolving unused entities and we would be happy to assist you.

Second

If you are considering creating a new entity, again, you should consider creating that entity prior to December 31, 2023. This step will allow you additional time to complete the necessary due diligence for CTA reporting compliance because the initial report will not be due until January 1, 2025.

If you would like to engage us to create any new entities or dissolve existing entities this year, please let us know. We are prepared to assist you in understanding the CTA; however, we are not engaging in any CTA compliance reporting until after the new year. We look forward to hearing from you should you have any questions.

Read the Official York Howell Announcement Letter