Rampulla & Newstad LLP

Do you own a business? Have you established a LLC for any reason? Did you transfer a business or LLC into a Trust? The reporting landscape for businesses is undergoing a huge transformation with the introduction of the Corporate Transparency Act (“CTA”). This legislation creates a new framework for ownership reporting, impacting smaller and larger businesses alike.

The CTA was passed in an effort to combat money laundering and other illegal activities. This federal law applies to any businesses that are formed by registering or filing paperwork with the state or commonwealth. If you do not fall into one of the few, very narrow exceptions, that means your business now must report certain business information to the Financial Crimes Enforcement Network (“FinCEN”), a part of the U.S. Treasury Department.

If the CTA applies to a business entity, that business must now disclose the following information about the business itself:

  • The legal name of the business;
  • Any trade names of the business;
  • Current U.S. business address;
  • Jurisdiction of formation; and
  • Taxpayer identification number

Additionally, it must provide beneficial ownership information about the business, including:

  • Each beneficial owner’s name, date of birth and residential (not business) address;
  • Identification number from a non-expired passport or driver’s license; and
  • An image of the passport or license used for the identification number

This imposes a new burden on business owners; too great a burden, perhaps? The National Small Business Association (“NSBA”) thinks so. The NSBA recently sued to stop the law from taking effect, arguing it will unfairly and disproportionately harm small businesses. The court ruled in favor of the NSBA, but limited the ruling to the individual plaintiff, the NSBA itself, and members of the NSBA as of March 1, 2024. Everyone else is still expected to comply with the reporting requirements until the appeals process is complete.

For entities or businesses created before January 1, 2024, initial reports must be filed by January 1, 2025, with subsequent updates within 30 days of any changes. Entities created after January 1, 2024, but before January 1, 2025, must file initial reports within 90 days, while those created on or after January 1, 2025, have 30 days for their initial filing. Failure to comply carries severe penalties, including fines and potential jail time.

If you own a business, or exert significant control over a business, or you have a Trust that owns a business, or if you are unsure about any of these things: Please reach out to us to discuss what – if anything – needs to happen going forward.