Contributed by Idea Collective Member:
Attorney and founder of Athena Legal Solutions
The CTA was implemented to try and combat the use of shell companies to facilitate money laundering, tax evasion and other illicit activities, the CTA requires companies to report certain personal information about their beneficial owners to the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN). There is a rough estimation that 32.6 million companies will be subject to these reporting requirements and around 5 million will be subject each following year.
Any eligible companies existing before January 1, 2024 will have until January 1, 2025 to report their beneficial owner information.
Athena will reach out to all current clients after January 1, 2024 to discuss your obligations under the CTA and how we can assist you. If you aren’t an Athena client, please reach out and we’ll help you understand your obligations.
Any companies formed after January 1, 2024 will have 30 days to report formation information. For all eligible companies, any changes in ownership would need to be reported within 30 days of a change in ownership.
Since any companies formed after January 1, 2024 will need to complete this filing, Athena will add this service to our flat-rate formation packages, but it will cause an increase in price for those packages.
The information needing to be submitted is the following:
Each beneficial owner (as defined below): Name, date of birth, residential address, and ID number (like passport number, Driver’s license number, government issued ID, or foreign passport) Federal, state, local or tribal officials will have access to the information reported along with specific foreign officials who submit a request through a U.S. Government agency if it is related to national security, intelligence and law enforcement. The information reported will be stored in a secure nonpublic database.
TLDR*: Company Name, any DBAs, Company Address, EIN and Name, date of birth, home address, Driver’s license or Passport number of any owners, board members, and senior officers
For reference, an eligible company under the CTA is either a domestic or foreign corporation, limited liability company or similar entity that is either formed in an U.S. state or is registered to do business in an U.S. state and does not meet the exemptions under the CTA.
The types of companies/entities that are exempt from reporting under the CTA are:
TLDR*: Almost every LLC and corporation with less than 20 employees in the U.S. must file a report
A beneficial owner under the CTA is an owner that directly or indirectly exercises substantial control over the reporting company or who owns or controls at least 25% of the reporting company’s ownership interests.
Substantial control is demonstrated in four different ways:
Ownership interest includes shares, voting rights, profit interest, convertible interests, and options. This means that even if an individual is not a voting owner of a company, if they have at least 25% in one of the above options, then their information will need to be reported.
If a business fails to comply with this requirement, the CTA provides both civil and criminal penalties which include fines up to $10,000 and the possibility of two years in prison.
If you have questions about whether your organization or company is required to meet with this requirement under the CTA or any additional questions about this new reporting requirement, please reach out to our office and set up a time to meet with one of our attorneys.
*TLDR – Too Long Didn’t Read
Founding Athena Legal Solutions has allowed me to use my business, nonprofit, and legal skills honed after more than two decades in private and public sectors. Unlike most lawyers, I’ve never worked at a law firm, I’ve only ever worked as in-house counsel for an organization. Therefore, my approach to the law is based on the pragmatic realities of running an organization and focused on supporting you in achieving your goals!
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