As previously noted, businesses must comply with the reporting requirements of the Corporate Transparency Act (“CTA”) by January 1, 2025. Since the CTA requirements took effect, Flaster Greenberg attorneys have worked with hundreds of businesses of various sizes to determine their reporting requirements under the CTA and complete filings on their behalf. Based on our experiences, we share the following to keep in mind when evaluating your reporting requirements:
- Help is Out There.
- The Financial Crimes Enforcement Network (“FinCEN”) provides useful resource materials for small business owners, including a substantial Frequently Asked Questions webpage and a comprehensive Small Entity Compliance Guide.
- Our attorneys have the experience necessary to assist you with analyzing whether your entity is exempt or has to report and, if the entity has to report, who has to report as a Beneficial Owner.
- You May Not Have to Report.
- There are twenty-three (23) exemptions to the CTA’s reporting requirements. Exempt entities do not need to complete any filings.
- The most relevant exemptions for small business owners’ entities are the following:
- Large Operating Entity: (i) employ more than 20 full time employees in the US, (ii) have a physical operating presence in the US, and (iii) have reported in excess of $5,000,000 in gross sales on a federal income tax return.
- Inactive Entity: (i) been in existence before January 1, 2020, (ii) not be engaged in active business, (iii) be owned by a citizen or resident of the US, (iv) not have experienced a change in ownership in the preceding twelve (12) month period, (v) not have received or sent any funds in an amount greater than $1,000 in the preceding twelve (12) month period, and (vi) not hold any kind of assets either in the US or abroad.
- Subsidiary of an Exempt Entity: ownership interest is controlled or wholly owned by one of eighteen (18) types of exempt entities.
- A FinCEN ID will Streamline your Current and Future Compliance.
- Individuals that qualify as a Beneficial Owner of more than one entity should consider registering for a FinCEN ID to simplify and expedite their filing process.
- Beneficial Owners are required to report certain information about themselves and photo identification for every entity they beneficially own. After initial filings, these individuals are required to update any changes to their reported information within thirty (30) days.
- Registering for a FinCEN ID enables an individual to apply for and receive a unique identifying number which they can submit to FinCEN in lieu of their personal information for each filing. When reporting an update, the individual only needs to update their information in the portal for their FinCEN ID instead of with every entity they are affiliated with.
- If you have multiple reporting persons, it may be best for all persons to obtain a FinCEN ID to ease the administrative burden or retyping information.
- Obtaining a FinCEN ID is Easy.
- Go to https://fincenid.fincen.gov/ and create a log-in.
- Enter your name, address, date of birth, and information about your photo identification (driver’s license, passport, etc.)
- Take a picture of the photo identification and upload the image to the website.
- Try your Best, but Reach out for Help.
- Trying your best to comply is better than not complying at all.
- FinCEN has said that penalties for non-compliance are for “willful” violations (ie, you deliberately fail to comply or evade the filing requirements, despite knowing you have to file.
- So – do you best to file a report, keeping in mind that Flaster Greenberg attorneys are here to assist you through this process.
If you have any questions about the CTA and how it affects you or your organization, please contact your attorney at Flaster Greenberg, one of the members of our firm's CTA Task Force (Jonathan Ellis, Mariel Giletto, Anthony Gruzdis, Matthew Meltzer, David Neufeld), or any attorney in the Business & Corporate Department, to discuss how we can help determine whether the CTA applies to you or your organization and, if necessary, comply with the CTA.
