Newsflash! Uncle Sam Wants Your Business Entity's Information: The 2021 Corporate Transparency Act

Authors: Victoria L. Cejka, Esquire

On January 1, 2021, Congress passed the William H. (Mac) Thornberry National Defense Authorization Act for Fiscal Year 2021, which includes the Corporate Transparency Act (the “Act”). In an effort to combat the use of anonymous entities, such as shell companies, for money laundering, tax evasion, financing of terrorism, and other criminal acts, the Act establishes a national beneficial ownership registry for private entities registered to do business in the United States.

For the first time in history, the Federal government now requires smaller private companies to annually report information concerning the entity’s ownership to the Financial Crimes Enforcement Network (FinCEN) branch of the U.S. Treasury Department. The “Reporting Companies” covered by the Act include corporations, LLCs, and other “similar entities” created by filing documents with a secretary of state as well as foreign entities registered to do business in the United States. Charitable entities (including private foundations), heavily regulated entities that already provide ownership information to the government, and companies with more than 20 employees having gross receipts exceeding $5 million are exempt under the Act’s reporting requirements. It remains to be seen whether private trusts would be included, since trusts do not involve filings with a secretary of state. However, there is question whether a private trust would be considered “similar entities”.

Reporting Companies will be required to report information related to those who own and control the entity (“Beneficial Owners”) and those who apply to form the entity (“Applicants”). For each Beneficial Owner and Applicant, the entity must disclose the 1) full legal name, 2) date of birth, 3) current residential or business address, and 4) a unique identifying number or FinCEN identifier.

Feeling unprepared for these new requirements? You’re not alone. Thankfully there is time to start collecting the necessary information. First, FinCEN needs to design and implement the infrastructure needed to gather and store the reported data as a national registry. Additionally, the requirements under the Act are not effective until the Secretary of Treasury issues regulations, which could be anytime in 2022 or 2023. Once the regulations become effective, existing companies have two years to file the required information. Subsequent entities must report upon the formation of the entity.

Companies should start collecting the applicable information as soon as possible. This includes gathering beneficial ownership and Applicant information, reviewing governance documents, and constructing a process for meeting the Act’s annual reporting requirements.

To ensure that your business entity complies with the Act’s requirements, contact your SATC|Law attorneys for further information and guidance.

CONTACT:

Victoria L. Cejka, Esquire
vcejka@satclaw.com
Direct: (312) 554-3103

John W. Campbell, Jr., Esquire
jcampbell@satclaw.com
Direct: (312) 554-3110

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