New legislation, the Corporate Transparency Act (the “Act”), and its implementing regulations will require certain companies to report identifying information on the company’s primary authorities and on persons who formed or registered the company. The Act goes into effect on January 1, 2024.
The Act targets U.S.-registered corporations and limited liability companies. It targets the opacity that allows individuals to use these companies for money laundering and evading international sanctions. Companies subject to the Act (“reporting companies”) include small businesses and organizations that are not already subject to mandated transparency.
Large companies are exempt from reporting. The large company exemption applies to companies that have:
The Act requires disclosure of identifying information for owners that have a 25% or greater ownership interest or who exercise substantial control. Persons who exercise substantial control include chief executives, those with the authority to appoint or remove senior officers or a majority of directors, and those who direct, determine, or have substantial influence over decisions about the company’s business, finances, and structure. If the company is formed or registered in the U.S. on or after January 1, 2024, then up to two “Company Applicants”, i.e. individuals who formed or registered the company, must also report their identifying information.
The required identifying information includes:
If the company already exists or is registered in the United States before January 1, 2024, it must file its initial report by January 1, 2025. If the company is created or registered to do business in the United States on or after January 1, 2024, then it must file its initial report within 30 days after receiving notice that its creation or registration is effective. After the initial report, reporting companies need only submit updates if the reported information changes or if the company becomes aware of an inaccuracy in the initial report. The Act contains no periodic reporting requirement.
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