Learning Center: Corporate Transparency Act

On January 1, 2021, Congress enacted the Corporate Transparency Act (the “CTA”) for the purpose of protecting U.S. national security, combat money laundering, and promoting financial transparency. The CTA requires certain businesses and other entities to report information on their beneficial owners to the Financial Crimes Enforcement Network (FinCEN). Mandatory compliance with these reporting obligations begins on January 1, 2024.

FinCEN has estimated that during the first year of reporting there will be approximately 32.6 million reports filed in 2024, and an additional 5-6 million reports filed every year thereafter. Your organization is very likely required to file a report with FinCEN.

Failure to comply with the CTA can result in a civil penalty of up to $500 per day and a criminal penalty of up to $10,000 per violation and/or imprisonment for up to 2 years. Fortunately, these penalties only apply for willful failure to comply with the CTA. Good faith effort is the best way to avoid a finding of willfulness and the best way to show good faith compliance is to hire qualified professionals.

Cunningham Dalman can ensure you are in compliance with the CTA. Our attorneys can prospectively assess whether you are required to file any reports, prepare and submit those reports, and retrospectively review whether you have met your filing obligations and, if not, recommend and carry out a remedial course of action to reduce your risk of any penalties. Contact us if you would like our assistance with your CTA compliance needs.

CTA Resources

Additional Information will be published soon:

Common Questions about the Corporate Transparency Act

Our attorneys have compiled a list of the most common questions about the Corporate Transparency Act and provided brief answers so you can better understand the Corporate Transparency Act and how it may affect you or your business.

Who is obligated to comply with the Corporate Transparency Act?

All Reporting Companies are obligated to comply with the Corporate Transparency Act and may be subject to one or more penalties for noncompliance, though any person can be penalized for participating in a willful violation of Corporate Transparency Act reporting obligations.

Which organizations are considered “Reporting Companies”?
A Reporting Company can be formed domestically in the United States or formed in a foreign jurisdiction and operating in the United States.

  • Domestic Reporting Company. A domestic Reporting Company is any corporation, limited liability company, or any other entity created by the filing of a document with a secretary of state or any similar office under the law of a State in the United States or Indian tribe.

  • Foreign Reporting Company. A foreign Reporting Company is any corporation, limited liability company, or any other entity formed under the law of a foreign country and registered to do business in any State in the United States or tribal jurisdiction by the filing of a document with a secretary of state or any similar office under the law of a State or Indian tribe.
Do all Reporting Companies have the same reporting obligations?

Most Reporting Companies will be required to report their Beneficial Owner information, while others will qualify for an exemption from reporting that information. Nevertheless, even those Reporting Companies who qualify for an exemption must still file a report with FinCEN to report the Reporting Company’s identifying information and qualification for the exemption.

A Reporting Company may be obligated to report all of its Company Applicants.

If any information previously reported to FinCEN changes, all Reporting Companies are required to file an updated report within 30 days of the change.

What is "Beneficial Owner"?

A Beneficial Owner is an individual who directly or indirectly (i) exercises substantial control over a Reporting Company or (ii) owns or controls 25% or more of the ownership interests in a Reporting Company. An individual can meet these thresholds by a direct relationship with the Reporting Company or indirectly through one or more entities, trusts, or similar arrangements. Determining whether an individual meets one of these thresholds can difficult and the facts of every situation should be diligently reviewed.

What is a "Company Applicant"?
A Company Applicant is a person who performs the actual task of filing the document that initial creates the Reporting Company or the document that initially registers the Reporting Company to do business.
 
  • For domestic Reporting Companies, a Company Applicant is an individual who files the document that initially creates the Reporting Company.
 
  • For foreign Reporting Companies, a Company Applicant is an individual who files the document that initially registered the foreign Reporting Company to do business in the United States.
If more than one individual was involved with either of these files, the individual who directly files the document and the individual who was primarily responsible for directing or controlling such filing must both be disclosed.
What information must a Reporting Company disclose to FinCEN?
A Reporting Company must disclose certain identifying information about itself, its Beneficial Owners, and (for Reporting Companies created after January 1, 2024) its Company Applicants.

  • The Reporting Company must disclose its full, legal name and any trade names, assumed names, and “doing business as” names, the Taxpayer Identification Number (e.g., EIN), complete current address of the principal place of business, and State, Tribal, or foreign jurisdiction of formation.

  • If Beneficial Owners are required to be disclosed, the Reporting Company must disclose each Beneficial Owner’s full, legal name, date of birth, complete and current mailing address, unique identifying number from an acceptable identification document, and a copy of that identification document.

  • If Company Applicants are required to be disclosed, the Reporting Company must disclose each Company Applicant’s full, legal name, date of birth, complete and current residential mailing address (though a business address is sometimes permitted), unique identifying number from an acceptable identification document, and a copy of that identification document.
An acceptable identification document includes a U.S. passport, driver’s license or other photo ID issued by federal, State, local or Tribal government agency, or if none of the above are available, a passport issued by a foreign jurisdiction.
What is a FinCEN Identifier?

To alleviate some of the burden of updating previously filed reports, the Corporate Transparency Act allows Beneficial Owners and Company Applicants to request a FinCEN ID. Any Beneficial Owner or Company Applicant can update the information on file for their FinCEN ID, which update will apply to any information on file for a Reporting Company.

When are these disclosures due?
  • Initial Reporting. Any business or other entity that meets the definition of a Reporting Company (even if the entity meets the requirements of any exemption) is required to file an initial report with FinCEN. If a Reporting Company is in existence on January 1, 2024 then that initial filing must be completed before December 31, 2024. If a Reporting Company is created on or after January 1, 2024 but before January 1, 2025 (i.e., during calendar year 2024) then that initial report must be submitting within 90 days of its creation. If a Reporting Company is created on or after January 1, 2025 then that initial report must be submitting within 30 days of its creation.

  • Ongoing Reporting. If any of the information previously submitted by a Reporting Company to FinCEN changes, including any Beneficial Owner or Company Applicant information, then the Reporting Company must submit an update within 30 days after the that information has changed.
What are the penalties for noncompliance?

Noncompliance with the Corporate Transparency Act reporting obligations can result in a civil and/or criminal penalty. The civil penalty is up to $500 per day while the violation continues. The criminal penalty is up to $10,000 per violation and/or imprisonment for up to 2 years. However, only “willful” violations will result in a penalty; an inadvertent mistake by a Reporting Company acting diligently and in good faith is unlikely to result in a penalty. The facts and circumstances surrounding the violation are important in determining whether a violation is willful or inadvertent. A showing of good faith will be very important to avoid any penalties.

Contact Us for Further Assistance

Our attorneys are here to help you understand your filing obligations
under the Corporate Transparency Act.
When are these disclosures due?
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