WHAT BUSINESS OWNERS SHOULD KNOW ABOUT THE CORPORATE TRANSPARENCY ACT

By: Scott M. Ceurvels, Esq.




ATTENTION ALL BUSINESS OWNERS

 New Federal Information Reporting Requirements to be Imposed on Privately-Held Companies and Their Owners by the U.S. Department of Treasury


Effective January 1, 2024, corporations, limited liability companies and similar entities (which are not publicly-traded companies) must file detailed information concerning the entity and its owners with the U.S. Department of Treasury. Significant penalties will be imposed on entities and owners for noncompliance with this new reporting requirement.


These obligations arise from the National Defense Authorization Act for Fiscal Year 2021, in which Congress enacted the Corporate Transparency Act (“CTA”) as a component of the Anti-Money Laundering Act of 2020. This article provides a summary of the CTA, the reporting requirements it creates and the penalties that could be imposed in the event of noncompliance.


Purpose. The CTA is intended serve a variety of purposes, from improving national security and anti-money laundering standards to gathering information about entities within the United States with “hidden owners” and setting a clear and universal standard for incorporation practices.


Reporting Obligation. The primary mechanism by which the CTA seeks to achieve these purposes is the establishment of a national registry of beneficial owners of certain entities, referred to as “reporting companies”, which will be required to file with the Financial Crimes Enforcement Network (FinCEN), a bureau within the U.S. Department of Treasury, reports identifying the company’s beneficial owners and information about company applicants. The contents of these reports will be discussed in more detail below.


Reporting Companies. The CTA defines a “reporting company” as any corporation, limited liability company, or other similar entity that is created by filing a document with the Secretary of State or similar office in any state, territory, federally recognized Indian Tribe, or under the laws of a foreign country and registered to do business in the United States.


Beneficial Owners. The CTA defines a “beneficial owner” as an individual who, directly or indirectly:


  • Exercises substantial control over the entity; or
  • Owns or controls not less than 25 percent equity in the entity.


The CTA also excludes certain individuals from the definition of beneficial ownership, including:


  • a minor child (as long as the child’s parent’s or guardian’s information is reported);
  • a person acting as an agent on behalf of another;
  • a person whose control over the company derives from employment, not ownership;
  • a person whose only interest in the company is through a right of inheritance; or
  • a creditor of the company (unless they qualify as a “beneficial owner”)


Company Applicants. The “company applicant” is either:


  • The person who directly files the document that creates the entity for domestic reporting companies, or the document that first registers the entity to do business in the U.S. if the entity is a foreign reporting company; or
  • The person who is primarily responsible for directing or controlling the filing of the relevant document, described above, by another person.


Reporting Requirements. In each report to FinCEN, a reporting company is required to provide the following information for each beneficial owner of the entity:


  • Beneficial owner’s full legal name;
  • Date of birth;
  • Current residential address; and
  • A unique identifying number from an acceptable identification document (driver’s license, passport, etc.).


Company applicants will also be required to provide this information, but may provide a business street address rather than a residential address. However, company applicants will only be required to provide this information for entities formed on or after January 1, 2024.


Additionally, certain “company information” is required in the report, including the reporting companies’:


  • Full legal name;
  • Any trade name;
  • Current address of the principal place of business;
  • Jurisdiction of formation; and
  • Internal Revenue Taxpayer Identification Number (TIN) (including an Employer Identification Number) of the reporting company.


Exceptions. The CTA contains a number of exceptions for entities exempt from reporting, including certain regulated industries which already require similar beneficial ownership information reporting, publicly traded companies, certain investment companies, nonprofits and government entities.


There is also a significant exception that applies to “large operating companies” which meet the following conditions and are therefore exempt from the reporting requirement:


  • Employs more than 20 employees;
  • Filed in the previous tax year a tax return demonstrating more than $5 million in gross receipts or sales; and
  • Has an operating presence at a physical office within the United States.


Effective Date. The date that initial reports to FinCEN are due depends on whether the reporting company is an existing entity or a newly formed one. The final rule implementing the CTA will go into effect on January 1, 2024. Reporting companies in existence prior to this date will have one year, until January 1, 2025, to file their initial reports with FinCEN. Reporting Companies created or registered to do business between January 1, 2024 and December 31, 2024 must file an initial report within 90 days of creation/registration. Reporting Companies created or registered to do business on or after January 1, 2025 must file within 30 days of creation/registration.


Following the filing of a Reporting Company’s initial report, any changes to the information included in previous filings – except for changes with respect to the company applicant(s) – must be reported within 30 days of such change.


Penalties. Providing false information or failing to report complete information to FinCEN can result in fines of $500 per day up to a maximum civil penalty of $10,000 and imprisonment for up to two years. The CTA does contain a safe harbor from liability for the submission of inaccurate information if the person who submitted the report voluntarily corrects the report within 90 days.


For further information regarding your particular circumstances, or if you need assistance with compliance, reach out to your accountant or contact us at (315) 471-8111.


This article is intended to be for informational and discussion purposes only and is not to be construed as legal advice or as a legal opinion on which certain actions should or should not be taken.

CLIENT ALERT: Protect Your Property from Deed Fraud in Florida

August 21, 2025
Stewart M. McGough, Esq. Deed fraud is increasing rapidly in Florida. Criminals have been forging property deeds to unlawfully transfer ownership and sell properties without the real owner's knowledge. Any property owner may be affected, including homeowners, and the legal costs to reverse this type of fraud can be substantial. To help combat this risk, Florida law now requires each county Clerk of Court to provide a Property Alert Service . This free service notifies you when a document such as a deed is filed under your name or your property's legal description. Steps You Should Take Register for Property Alerts Visit the official Florida Court Clerks website: https://www.flclerks.com/page/PropertyAlertServices Choose Your County (or Counties) Click the link for each county where you own property. Complete the online registration with your name and property information. Watch for Notifications If someone files a deed involving your property, you will receive an alert by email, text, or phone depending on the county. If the filing is legitimate, no action is needed. If it appears fraudulent, contact the Clerk immediately and consult an attorney to prevent the deed from being recorded. Why This Matters Deed fraud can occur silently and without warning. Registering for alerts gives you immediate notice so you can respond before the fraud is finalized and your property is illegally transferred.  Please take a few minutes to register today. This simple step can protect your property and avoid major legal complications.

Important Notice for New York State LLCs

August 8, 2024
By: Nicholas J. Graham, Esq. Limited Liability Companies ("LLC") have been authorized in New York since 1994. When the law was first enacted, an LLC could not have perpetual existence like corporations. This limitation was removed in 1997. If your LLC was established under the old New York State law that imposed a 30-year lifespan, it's crucial to be aware of the approaching expiration of your company's duration. Originally, LLCs in New York were required to specify a limited duration, commonly set at 30 years. Many of these companies are now reaching the end of this period and must take action to continue operating. Special attention should be given to LLC's formed between 1994 and 1997, as they were likely established with a 30-year lifespan. What Has Changed? The law in New York has evolved, and LLCs are no longer bound by the 30-year limit. Pursuant to NY LLC law §701(1), businesses now have the option to exist perpetually, providing greater flexibility and stability for long-term planning. However, this change is not automatic for existing LLCs that were originally set up with a 30-year term. What You Need to Do To ensure your LLC can continue its operations beyond the original 30-year term, you need to file an amended Articles of Organization with the New York Department of State. This amendment should update the duration of your LLC to perpetual, or to another term if desired. Steps to Amend Your Articles of Organization: Prepare the Amendment: Draft an amendment to your LLC's Articles of Organization. This document should clearly state the new duration of the LLC, typically set to "perpetual." File the Amendment: Submit the amended Articles of Organization to the New York Department of State. This can usually be done online or by mail. Ensure that you include the necessary filing fee. Update Internal Documents: Reflect the change in your LLC's operating agreement and any other internal documents to ensure consistency and compliance. Notify Members and Stakeholders: Inform all members and relevant stakeholders of the change to ensure everyone is aware of the updated status of the LLC. Why It Matters Failing to update your LLC’s duration could result in the automatic dissolution of the company once the original 30-year term expires. This could lead to significant disruptions in business operations and potential legal complications. By taking proactive steps to amend your Articles of Organization, you can ensure the continuity of your LLC and take advantage of the flexibility offered by the current laws. Need Assistance? The Scolaro Law Firm specializes in helping businesses navigate changes in regulatory requirements. If you need assistance with amending your Articles of Organization or have any questions regarding your LLC's status, please contact us. Our experienced team is here to provide the guidance and support you need to keep your business running smoothly. This article is intended to be for informational and discussion purposes only and is not to be construed as legal advice or as a legal opinion on which certain actions should or should not be taken.