Updated: October 31, 2023
NEW REQUIREMENTS FOR U.S. COMPANIES STARTING JANUARY 1, 2024
The Anti-Money Laundering Act of 2020 (AMLA) established the Corporate Transparency Act (CTA). The CTA requires certain U.S. and foreign entities that are defined as reporting companies to report beneficial owners and company applicants to FinCEN (the Department of the Treasury’s Financial Crimes Enforcement Network), beginning January 1, 2024. FinCEN will establish and maintain a non-public national registry of beneficial owners and company applicants of reporting companies to prevent and combat money laundering, terrorist financing, corruption, tax fraud and other illicit activity.
As we understand the law, it is no different than providing information to the IRS. The information will not be publicly available as the law is currently written. Anonymity is almost never perfect, and it does not provide anonymity from the Government. The structure that you have created provides anonymity from the public. Additionally, anonymity is only part of what the structure offers. Limited liability is arguably the most important piece of the structure.
Which companies are affected?
All companies incorporated with one of the 50 Secretaries of State. This includes all corporations and LLCs. It does not include most Revocable Trusts, for example Living Trusts and Land Trusts, and general partnerships (equivalent to a GbR or OHg). Also excluded are foreign companies. In addition, there are 23 other exceptions.
What does the CTA require of me?
Companies required to report must disclose all direct or indirect owners of at least 25% of the shares. In addition, such individuals who have substantial control over the company must be disclosed. This includes all officers, the board of directors, and the authorized signatories of the parent company. Names, dates of birth, place of residence and passport information (including copy of ID) are requested.
Who receives the information?
The Financial Crimes Enforcement Network ("FinCEN") at the U.S. Treasury. Access is also provided to law enforcement agencies, financial institutions, and other authorized persons, including foreign tax authorities.
What is the cost of filing the report?
FinCEN fees are not known at this time.
When does the law go into effect?
January 1, 2024
When does the report need to be filed?
Companies formed before the effective date of January 1, 2024 have until January 1, 2025 to file their reports. Companies incorporated after January 1, 2024, have 90 days.
Where is the report filed?
The filing is done electronically. The system is currently being developed by FinCEN.
Who will file this report?
Royal Legal will do this on your behalf. It will be your responsibility to report any changes to us after the initial filing so we can determine if additional reporting is required.
Royal Legal will be offering this service and will communicate next steps and any costs once FINCEN has finalized their website, filing requirements and filing process.
Is it a one-time report or does the CTA create a recurring obligation?
At this time there is no set frequency but any changes among the relevant persons must be disclosed.
What happens if I file the report late or not at all?
Violators face civil penalties of up to $500 per day. Criminally, one could face up to 2 years in prison and up to a $10,000 fine. A timely filing of incorrect information will go unpunished if corrected within 90 days of filing.
Additional Resources:
https://www.fincen.gov/boi-faqs
Next Steps:
Once the government has finalized the Beneficial Ownership Information (BOI) reporting website Royal Legal will communicate next steps and any costs for this service.
Scott Royal Smith is an asset protection attorney and long-time real estate investor. He's on a mission to help fellow investors free their time, protect their assets, and create lasting wealth.
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