What You Need to Know About the Corporate Transparency Act (CTA)
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- Опубліковано 16 гру 2022
- Do you own or advise a corporation, limited liability company (LLC), limited partnership, limited liability partnership, limited liability limited partnership, or business trust? If so, be alert. There’s a new federal filing requirement coming.
Today, we'll cover the overview of the requirements, who is required to report, what the deadlines are, and what happens if you don't (let's avoid this). I'll give you all the details you need to know for yourself or to advise clients as a CPA, attorney, financial advisor, trustee, and more.
The Corporate Transparency Act is Coming
What is it?
Back in 2020, Congress passed a new law called the Corporate Transparency Act (CTA) that requires corporations, LLCs, and other business entities to provide information about their owners to the Department of the Treasury as part of a government crackdown on corruption, money laundering, terrorist financing, tax fraud, and other illicit activity. It targets the use of anonymous shell companies that facilitate the flow and sheltering of illicit money in the United States.
What do I have to do now?
Businesses subject to the law will have to file a “beneficial owner report” with FinCEN, including each beneficial owner’s full legal name, date of birth, and residential street address, as well as an identifying number from a legal document such as a driver’s license or passport. FinCEN will include the information in a database for use by law enforcement, national security and intelligence agencies, and federal regulators that enforce anti-money-laundering laws. The database will not be publicly accessible.
Top 4 Things to Know
1. This requirement will go into effect beginning in 2024, and there are hefty fines for failing to report. As soon as it goes into effect, new corporations, LLCs, and other entities will have to comply with the filing requirement within 14 days of being formed, and existing entities will have one year to comply.
2. Millions of small businesses are affected. The reporting requirements will apply to almost every small business that is not a sole proprietorship or general partnership, including corporations, LLCs, limited liability partnerships, limited liability limited partnerships, business trusts, and most limited partnerships-over 30 million in all.
Larger companies with over 20 full-time employees and $5 million in gross receipts are exempt.
3. There will be many beneficial owners. The proposed regulations make it clear that a company can have multiple beneficial owners, and it may not always be easy to identify them all. There are two broad categories of beneficial owners:
any individual who owns 25 percent or more of the company, and
any individual who, directly or indirectly, exercises substantial control over the company.
4. Law and accounting firms are not exempt. Neither the CTA nor the proposed regulations contain any exemption for legal or accounting firms, except for the relatively few public accounting firms registered under Section 102 of the Sarbanes-Oxley Act of 2002. Thus, any law or accounting firm that is a professional corporation or an LLC will have to file a beneficial owner report unless it has more than 20 employees and $5 million in annual income.
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Strohmeyer Law is a law firm based in Houston, Texas, specializing in tax law, estate planning, and probate law.
Nothing in this video is specific legal advice for you. Watching or commenting on this video doesn't create an attorney-client relationship.
For more information, visit: www.strohmeyerlaw.com
Instagram: strohmeyerlawpllc
Your video is the best video I've seen that brakes down the Corporate Transparency ACT (CTA). Great Job, I will definitely be sharing it in my Live Podcast Show. Thanks for giving us this INFO!!! I'll be sure to add your link in my description. 💯
Thank you!
@@strohmeyerlawpllc You're Welcome!!!
Great information! Thank you!
Glad it was helpful!
As a minority owner, how do I find out if our CPA has reported to FinCin?
Have you reached out to the CPA directly? They should have a record of the filing if they did it.
Timing? I am confused on the timing. While researching for this law i read that if i formed the llc this year i have 90 days to file BOI. You say in this video that i had 30 days.
on the New Mexico Secretary of state web site it says" Any domestic reporting company formed on or after January 1, 2024, must file a BOI report within 90 days"
Please advise
The confusion is understandable. The rules changed after I uploaded the video.
When I filmed the video, the deadline for entities filed in 2024 and beyond was 30 days. FinCEN later extended the deadline for entities formed in 2024 (but not in 2025 and beyond) to 90 days.
Does a s corp need to register for this and if so does it cost to register??
There is not a fee to register. An entity that is classified as an S corporation will need to report unless a specific exemption applies. There is not an exemption for S corporations.
I hope the Biden family have to present those documents IRS will be asking us😢
Nah, they make over 5 million annually
It's only for those making under 5 million. It's about treating small businesses as crime suspects.
So does a s corp have to register??
Maybe, because an entity that is classified as an S corporation will need to report unless a specific exemption applies. There is not an exemption for S corporations.
Does this cost any money to file??
There is no filing fee for this report.
The law defines United States to be the same as in the definition of Title 26 USC Section 7701. Read that definition and respond accordingly.
Where do you see that in the law? 31 USC § 5336 (what I'm assume you mean by "the law") doesn't have a definition of "United States" in (a), where the definitions are codified.
It does have a definition of "State" in 31 USC § 5336(a)(12), which "means any State of the United States, the District of Columbia, the Commonwealth of Puerto Rico, the Commonwealth of the Northern Mariana Islands, American Samoa, Guam, the United States Virgin Islands, and any other commonwealth, territory, or possession of the United States."
This definition is broader than the definition in 26 USC § 7701(a)(9), which defines “United States” as only the States and the District of Columbia.
There are two references to 26 USC § 7701 in 31 USC § 5336.
* In 31 USC § 5336(a)(7), "foreign person” is defined as a person who is not a United States person, as defined in 26 USC § 7701(a).
* In 31 USC § 5336(a)(14), "United States person” is defined by reference to 26 USC § 7701(a).
Under 26 USC § 7701(a)(3), a "United States person" is defined as any of the following.
(A) a citizen or resident of the United States,
(B) a domestic partnership,
(C) a domestic corporation,
(D) any estate (other than a foreign estate, within the meaning of paragraph (31)), and
(E) any trust if-
(i) a court within the United States is able to exercise primary supervision over the administration of the trust, and
(ii) one or more United States persons have the authority to control all substantial decisions of the trust.
@@strohmeyerlawpllc the TCA specifically states that the definition of United States in the TCA is the same definition as provided in 7701. They went out of their way to make that point, meaning that no other definition of United States can be used for the purposes of the TCA.
I assume you mean the Corporate Transparency Act when you say "TCA."
Please provide a specific reference to 31 USC § 5336, where the Corporate Transparency Act is codified, to support this. "the TCA specifically states that the definition of United States in the TCA is the same definition as provided in 7701."
@@strohmeyerlawpllc Certainly. "‘‘(14) UNITED STATES PERSON.-The term ‘United States person’ has the meaning given the term in section 7701(a) of the Internal Revenue Code of 1986."
www.fincen.gov/sites/default/files/shared/Corporate_Transparency_Act.pdf
"United States Person" is not the same as "United States." That definition is for "United States Person," which I have already agreed is at 31 USC § 5336(a)(14) and refers back to 26 USC § 7701(a)(3).
Do you have a citation for the definition of "United States" (and not "United States Person") in 31 USC § 5336?
INACTIVE ENTITY QUESTIONs for Clarification: Maintained a dormant LLC that was formed in 2009, SOS administratively dissolved on 12/31/2015 , then I reinstated 5 yrs later [latter 2020].. biz idea fail to launch, the LLC remains dormant as of date of this post...SO, instead of continuing to waste money on annual fees to the STATE...CAN I JUST DISSOLVE [ before or after effective date??] OR, am I subject to comply effective Jan 1 2024 ?
Also,... If I have been filling annual fees for this DORMANT=NON PROFITING, "EXISTING LLC" SINCE BEING REINSTATED...would THIS deem this LLC as being "OPERATIONALLY" ACTIVE and that I must report????? I reviewed the six requirements to being exempt from filing FOR INACTIVE ENTITIES... my answers were Yes to #1 being an LLC that was FORMED and EXISTED [per GA SOS STATE] on and before 1/1 2020....and Yes, to #s 2-6.....in their respective order.
You Input is Much appreciated, Your VIDS MAKE a lot of sense !!!!
Thank you!
If the entity exists (has not formally terminated legal existence with the appropriate governmental authority) on 1/1/24, then the starting point is that it will need to report unless an exemption applies. If you're saying that you meet the six requirements for Inactive Entity, then it sounds like it should qualify for the exemption. Merely continuing the existence of the entity should not "undo" the exemption if it otherwise qualifies.
I am not your lawyer, so please make sure you've consulted with someone familiar with your situation and circumstances and not some random head on the internet. :)
@@strohmeyerlawpllc Thank you..