As you may have read in news articles, the Corporate Transparency Act was enacted by Congress as part of legislation designed to combat money laundering. It is one of the most wide-reaching pieces of business legislation we have seen in years and requires small businesses and their owners to file reports with the Financial Crimes Enforcement Network (FinCEN) which set forth personally identifying information.
The entities which are required to report include corporations, limited liability companies (even if solely owned), limited partnerships and other similar entities which require filing with the State in order to be eligible to operate. The most common exceptions are sole proprietorships, general partnerships and trusts. There is also an exception for publicly traded companies, financial institutions and companies with more than 20 full-time (30 hours/week) employees and over $5 million in annual revenue (in the prior year).
Any reporting entity which was in existence as of January 1, 2024 must file its report during this calendar year. Entities created in this calendar year or thereafter must report within 90 days of the formation of the entity. If information changes during any year, a new report must be filed within 30 days of the change. Please note that, even if your lending institution has obtained all of this information from you, you are still required to report to FinCEN as well.
Reporting should be done online through the FinCEN website. If all of the necessary information is available to you, it should take between 15 and 30 minutes to complete the filing. The individuals who need to be disclosed within a company report are those who hold an equity interest of 25% or more, and those who have “substantial control” over the operations of the entity. While, in most cases, those individuals will be readily identifiable, there will be times when an analysis will be required.
In addition to providing the name and residential and business addresses of these individuals, a copy of each such person’s current drivers’ license or comparable government-issued document is also required to be uploaded with the filing.
It is also critical to note is that the penalties for willfully failing to report in a timely manner are significant: each individual (not entity) could be fined $500/day up to a maximum of $10,000. In addition, there is a possible imprisonment of up to two years. Penalties for non-willful or negligent violations have yet to be announced.
The information which is being transmitted to FinCEN will not be available to the public and is supposed to be securely maintained.
While it is possible for any reporting entity to report on its own, if you want our assistance in this process, please provide your Fischel Kahn attorney with legible copies of the front side of the drivers’ license of each individual who needs to be on the report.
Robert Kaufman, a principal at Fischel Kahn, focuses on estate and business planning and the administration, taxation and litigation of estates and trusts.