Complying with the Corporate Transparency Act (CTA) and the new Beneficial Owner Information Report with FinCEN in the United States may be a one-time task for many single-member LLC’s and closely held Corporations in the United States.

However, it is important to note that the vast majority of multi-member LLC’s and Corporations that have multiple Shareholders and Directors must not only disclose their beneficial owners to the Federal Government – these entities will likely have to continually update these informational beneficial owner reports with FinCEN to avoid penalties of $500 a day of up to $10,000.

The CTA, enacted as part of the National Defense Authorization Act for Fiscal Year 2021, mandates that certain companies report information about their beneficial owners to the Financial Crimes Enforcement Network (FinCEN).

According to the Federal Government, the CTA represents a significant step toward increasing corporate transparency and combating financial crimes that criminals may perpetuate through the use of shell corporations and LLC’s with undisclosed owners.

The CTA and the beneficial owner filing requirements have been put into place to prevent illicit activities such as money laundering, terrorism financing, and tax evasion by increasing transparency in corporate ownership. By collecting and maintaining up-to-date beneficial ownership information, FinCEN aims to create a comprehensive database that can be accessed by law enforcement agencies and regulators.

Beneficial owners are defined as individuals who, directly or indirectly, exercise substantial control over the company or own or control at least 25% of the ownership interests.

One crucial aspect of this legislation is the requirement to update beneficial owner information with the Financial Crimes Enforcement Network (FinCEN) which extends to changes in addresses, names, and other pertinent details of beneficial owners.

Under the CTA, companies must report any changes in beneficial ownership information to FinCEN within 30 days of the change. Key changes that trigger the need for an update include:

1. Changes in Ownership : If a beneficial owner sells or transfers their ownership interest, the company must report this change.
2. Changes in Management or Control: Any change in the individuals who exercise substantial control over the company must be reported.
3. Changes in Personal Information: If a beneficial owner changes their name, address, or other identifying information, the company must update this information with FinCEN.

1. Implement a Monitoring System: Establish a system to continuously monitor and track changes in beneficial ownership information. This can involve regular reviews of ownership records and maintaining close communication with beneficial owners.
2. Internal Reporting Procedures: Develop clear internal procedures for reporting changes in beneficial ownership. Ensure that all relevant personnel are aware of these procedures and understand their responsibilities.
3. Regular Training: Provide regular training to employees on the importance of compliance with the CTA and the procedures for updating beneficial ownership information.
4. Legal Counsel: Consult with legal experts who specialize in corporate law and compliance to ensure that your company is fully compliant with the CTA's requirements.

The Corporate Transparency Act represents a significant advancement in the effort to increase corporate transparency and combat financial crimes in the United States. By requiring companies to report and update beneficial ownership information, the United States Federal Government aims to combat money laundering, drug trafficking, and financial crimes.

For multi-member LLC’s and Corporations, complying with the CTA and the new beneficial ownership filing requirements will be an ongoing process that requires vigilance and proactive measures. By staying informed about the requirements of the CTA and implementing robust compliance procedures, companies can mitigate risks and exposure to severe penalties.

Della Torre Law, PLLC