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What your company has to know about new CTA reporting obligations

On Behalf of | Mar 17, 2021 | Legislative Updates

The Corporate Transparency Act came into effect earlier this year. The Act introduces new reporting obligations for companies that qualify as “reporting companies,” as well as steep penalties for failure to complete the required reporting. It is essential that every business owner understand the Act’s requirements, in order to make sure that they are in compliance.

Does my company qualify as a reporting company?

For the purposes of this Act, Congress defined a “reporting company” as any company that was created by filing articles of incorporation (or an equivalent document) with the secretary of state of any state or Native American Tribe.

This means that all corporations and LLCs, as well as any other business type with a similar creation process, must comply with the Act’s requirements. However, the Act also exempts certain types of companies from “reporting company” status.

For example, if your company employs more than 20 people, generated over $5 million in gross revenue, and has a physical presence in the United States, it will be exempt from “reporting company” status. Publicly traded companies, nonprofit organizations and insurance companies are also on the list of exempted companies.

What are my company’s obligations?

If your company qualifies as a “reporting company,” you will have to file a report with the Department of Treasury’s Financial Crimes Enforcement Network. This report must identify all beneficial owners of the business.

For each beneficial owner, you will have to list their full legal name, date of birth, business address or personal residence address and a unique identifying number from an acceptable document. This can be a passport, driver’s license or other state identification document.

Who counts as a beneficial owner?

If someone owns at least 25% ownership interest in your company, they qualify as a beneficial owner. They might also qualify as a beneficial owner if they exercise substantial control over your company.

Business law is an ever-changing field. It’s essential for business owners to keep current on new legislation, in order to avoid hefty fines and to keep their company in good standing.