Q: My spouse and I are the only two owners of an LLC, does the Corporate Transparency Act apply to us?
A: Yes, The Corporate Transparency Act or CTA is something you should be aware of as you will need to comply with its terms. CTA is a federal law that went into effect on January 1, 2024, requiring most entities, including LLCs, to report “beneficial owners” and individuals who exercise substantial control or decision-making authority to the Financial Crimes Enforcement Network also known as FinCEN.
The stated goal of this legislation is to combat money laundering and other illegal actions via disclosure of entity ownership to government agencies. Other than a few limited exceptions, all entities must file the appropriate reports or else face the prospect of steep fines and penalties.
The reporting is completed via a secured federal website where all the data is entered and stored. The CTA regulations state that all beneficial owners who either (1) exercise substantial control over the reporting company or (2) own or control at least 25 percent of the ownership interests in the reporting company through the corporate entity required to report. However, in certain circumstances, trustees, beneficiaries and other individuals who receive financial advantage from a business or entity need be disclosed as well.
For each person that falls under these requirements, there are four items that must be reported. The items to report include individual’s name, date of birth, address, and the official identification number from a driver’s license, passport, or other government ID as specified in the statute. The identification must not be expired and a copy must be submitted.
All existing entities formed prior to January 1, 2024 have until December 31, 2024 to comply with the reporting requirements. All entities formed as of January 1, 2024 should complete the reporting within ninety (90) days of receiving actual or public notice of creation or registration. An entity created or registered on or after January 1, 2025, will have thirty (30) calendar days to file after receiving actual or public notice that its creation or registration is effective.
It is best to contact the professional who assisted with the formation of your entity so that the formation date can be determined. You are not required to have an attorney in order to comply with the reporting requirements. However, given the novelty of these reporting requirements and complexity of the law, having an attorney provide advice in identifying beneficial owners and assist with the initial filings is strongly recommended.
- Katerina Grinko, Esq. is a Senior Associate attorney at Burner Prudenti Law, P.C. focusing her practice areas on Real Estate. Burner Prudenti Law, P.C. serves clients from New York City to the east end of Long Island with offices located in East Setauket, Westhampton Beach, Manhattan and East Hampton.