By: Austin Stevenson
This is the third and final installment of a series of articles on the Corporate Transparency Act (“CTA”), set to be effective January 1, 2024, and set to affect the majority of small businesses and LLCs throughout the United States.
If you missed our first and second article providing a general overview of the CTA and its reporting requirements, you can find them here:
- Preparing for the Corporate Transparency Act – Part I: What is it?
- Preparing for the Corporate Transparency Act – Part II: Who is a Beneficial Owner, and What Gets Reported?
This article provides more information regarding who is exempt from the CTA’s requirement to report personal information of Beneficial Owner’s and Company Applicant’s to the federal government.
The baseline rule under the CTA is that Reporting Companies must report certain personal information of their Beneficial Owners and Company Applicants to the Financial Crimes Enforcement Network (“FinCEN”).
A Reporting Company is a corporation, limited liability company, or any other similar entity that is created by the filing of a document with a secretary of state or a similar office under the law of a state, or a foreign entity formed under the law of a foreign country, and registered to do business in any U.S. state or tribal jurisdiction. Those companies must report the information described in our last article to FinCEN.
While the CTA will cover the vast majority of small businesses in the U.S., including single member LLCs, there are 23 exemptions from the CTA. Those exemptions are for companies that are:
- A securities reporting issuer
- Governmental authority
- Bank
- Credit union
- Depository institution holding company
- Money services company
- Broker or dealer of securities
- Securities exchange or clearing agency
- Other Exchange Act registered entity
- Investment company or investment adviser
- Venture capital fund adviser
- Insurance company
- State licensed insurance provider
- Commodity Exchange Act registered entity
- Accounting firm
- Public utility
- Financial market utility
- Pooled investment vehicle
- Tax exempt entity
- Entities assisting tax exempt entities
- Large operating companies
- Subsidiaries of certain exempt entities
- Inactive entities
Notice that most of the exemptions relate to companies that already were heavily regulated, and also note that small companies are not exempt unless they fit into one of the above exemptions. If a company believes it is exempt, it best be certain, as the penalties for violation of the CTA can include civil and criminal penalties for willful reporting violations, including fines of up to $10,000 and imprisonment for not more than two years.
The CTA goes into effect January 1, 2024. If you have questions about the CTA, its filing requirements, or its exemptions or our corporate and business services, you may contact Austin Stevenson at RAStevenson@strausstroy.com or 513-768-9745.