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On January 1, 2021, Congress enacted the Corporate Transparency Act (CTA) as part of the National Defense Act for Fiscal Year 2021.  The main goal of this act is to combat forms of illegal financing and money laundering through the use of anonymous shell companies.

This act requires all U.S. businesses, including corporations and limited liability companies with no prior anti-money laundering reporting requirements, to disclose their “beneficial ownership” information with the United States Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN). This includes both existing companies as well as newly formed entities, and also requires reporting whenever ownership is transferred or changed.  The information reported will not to be made publicly available, and is intended to be used only for law enforcement purposes.

The CTA defines a beneficial owner in very broad terms.  Any person who, either directly or indirectly, through any form of contract or understanding, exercises substantial control over a company or owns at least twenty five percent (25%) of the ownership interests in the company, qualifies as a beneficial owner under the CTA.

Any party who intentionally fails to comply with the CTA, including outside parties preparing the report on behalf of the company, can face a range of penalties, from fines of up to $500.00 for each day there is a failure to report the complete beneficial ownership of the company, to up to two years imprisonment.  These penalties do not apply to unintentional inaccuracies in reporting, provided the information reported is corrected within ninety (90) days of filing.

Under the CTA, FinCEN must issue regulations to implement the new beneficial ownership reporting requirements by December 31, 2021.  As of the date of this article, no such regulations have been implemented, and until FinCEN does so registration under the CTA will not be required.  However, owners should review the Corporate Transparency Act in advance to ensure that they will be in compliance.

Please contact us if you need assistance understanding or complying with this new requirement.

This is not intended to be legal advice.  You should contact an attorney to review your specific situation.

Michael J. Kenney is an Associate with the firm.  He concentrates in real estate, landlord tenant matters, and foreclosures. He can be reached by phone at 845-764-9656 and by email.


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