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Corporate Transparency Act: preventing all the money laundering done by small businesses

New requirements are in place for almost every business starting January 1, 2024.  Unless exempt under one of the 23 exemptions to the CTA (most of which are for entities which are already subject to reporting and filing requirements with the Financial Crimes Enforcement Network of the Department of the Treasury) businesses formed or registered by filing with a secretary of state will need to report who the beneficial owners of the entity are. 

Basically, unless you are a sole proprietor, you are probably subject to the new reporting requirements.  This means that corporations, LLCs, partnerships, or non-profit organization will need to report who the beneficial owners are of the entity. 

A “beneficial owner” is defined as, “with respect to an entity, an individual who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise – (i) exercises substantial control over the entity; or (ii) owns or controls not less than 25 percent of the ownership interests of the entity[.]” 


So, a beneficial owner is someone who owns 25% of an entity, but not someone who owns 24% of the entity; unless they exercise substantial control over the company.  It is possible that someone who does not ‘own’ any part of the entity could still be considered to exercise substantial control over the entity and must therefore be reported as a beneficial owner.  It could also include spouses, children, grandchildren, etc. 


Importantly, the ramifications are costly.  The willful failure to report complete or updated beneficial ownership information may result in civil or criminal penalties, including civil penalties of up to $500 per day that the violation continues, or criminal penalties including imprisonment for up to two years and/or a fine of up to $10,000.  Senior officers of an entity that fails to file a required report may be held accountable for that failure. 


I’m here to help.  If you are confused about the reporting requirements, schedule a consultation.  If you would like me to handle the filing, I will do so for $150.  I will send you a questionnaire, and be the point of contact with the Financial Crimes Enforcement Network of the Department of the Treasury so that you don’t have to deal with them, and can focus on running your business. 

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