The Department of Treasury is working toenhance transparency in business ownership and combat financial crimes by implementing the Corporate Transparency Act, enacted as part of the Anti-Money Laundering Act of 2020, which aims to establish a central registry of individuals who own or control small businesses.
Financial Crimes Enforcement Network (FinCEN) recently issued a final rule requiring certain entities to file with FinCEN reports that identify the Reporting Company and two categories of individuals: the Beneficial Owners of the entity, and the Company Applicant. The Company Applicant is the individual that filed an application (most commonly with the secretary of state) to create the entity or register it to do business in the United States. A Beneficial Owner is an individual who directly or indirectly exercises substantial control over the Reporting Company or owns or controls at least 25% of the ownership interest of the Reporting Company. The Company Applicant is the individual that filed an application (most commonly with the secretary of state) to create the entity or register it to do business in the United States.
There are exception categories for entities, but generally legal entities such as corporations, limited liability companies, and partnerships are defined as Reporting Companies.
A Reporting Company must provide the following:
- Entity name
- Business Street Address
- Jurisdiction of Formation
- Tax Identification Number or Employer Identification Number
- Beneficial Owners
- Company Applicants (if entity is created on or after January 1, 2024)
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- Full Legal Name
- Date of Birth
- Current Street Address
- Unique Identification Number (such as from a non-expired driver’s license or passport)
- Copy of driver’s license or passport containing the unique identification number provided
Reporting Companies that are formed before January 1, 2024 must report to FinCEN no later than January 1, 2025. Reporting Companies formed in 2024 must report to FinCEN within 90 days of formation. The rule imposes penalties for late filings and failure to file. Reporting Companies will also be subject to ongoing reporting requirements if there is a change in any of the information originally reported to FinCEN. If you have questions or concerns about how the Corporate Transparency Act may affect your small business, please contact your legal counsel.
The opinions and other information in the commentary are provided as of November 8, 2023. This summary is intended to provide general information only, and may be of value to the reader and audience.
This material is not a recommendation of any particular investment or insurance strategy, is not based on any particular financial situation or need, and is not intended to replace the advice of a qualified tax advisor or investment professional. While Commerce may provide information or express opinions from time to time, such information or opinions are subject to change, are not offered as professional tax, insurance or legal advice, and may not be relied on as such.
Data contained herein from third-party providers is obtained from what are considered reliable sources. However, its accuracy, completeness or reliability cannot be guaranteed.
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