New Corporate Transparency Act: Beneficial Owner Reporting Requirements, Civil and Criminal Penalties

Description

Beginning Jan. 1, 2022, the CTA will require private companies to disclose their "beneficial owners" to the U.S. Department of the Treasury's FinCEN. Companies formed on or after the date regulations are adopted must report when formed. Companies formed before regulations are effective will have a longer period to file their initial reports. The CTA explicitly covers LLCs and corporations and may be expanded to include partnerships and trusts.

The CTA defines who is required to be reported and the regulations are in development to determine measuring ownership and determining who is in control, as well as how to view multi-tiered companies and related parties. Rules are also expected to deal with supplemental reporting when there are ownership changes or changes in control of a private company.

The CTA may create a substantial burden on investors and small business owners. Counsel must be prepared to advise clients on when reporting is required and how to make proper filings.

Counsel should be aware of compliance regulations because the potential penalties are substantial. In addition to fines, the CTA includes the possibility of imprisonment for filing false reports or willfully failing to file.

Listen as our expert panel discusses compliance provisions of the CTA and best practices for businesses subject to this new law and what further steps the new administration and Congress may take related to anti-money laundering objectives.