Corporate Transparency Act

Brief Summary of the Corporate Transparency Act

On January 1, 2024, the Corporate Transparency Act (the “CTA”) went into effect. This new Federal law is intended
to stop bad actors from using legal entities to commit crimes such as money laundering and terrorism. The CTA generally applies to privately-held U.S. entities, including corporations, LLCs, limited partnerships, as well as non-U.S. entities registered to do business with any Secretary of State office.

The CTA requires certain companies (each, a “Reporting Company”) to file (a) an initial beneficial ownership information report, and (b) periodic updates in connection with a change in beneficial ownership.

These reports are submitted online to the Financial Crimes
Enforcement Network (“FinCEN”).

Reporting Companies and Exemptions

In general, a Reporting Company is (a) an entity that does not already report ownership information to the federal
government (e.g., a public company), and (b) is characterized by the following (i) 20 or fewer full-time employees in
the U.S.; (ii) an operating presence at a physical location in the U.S.; and (iii) reported less than $5 million in gross
sales on its U.S. income tax return for the previous year. An entity who has more than 20 full-time employees in the
U.S. and more than $5 million in gross sales is considered a “large operating company” and exempt from CTA
reporting obligations. In attempting to qualify as a large operating company, an entity company may count some
affiliates’ gross receipts but not employees of affiliates. There are more than 20 other exemptions that could also exempt an entity from the CTA.

Beneficial Owners

Two groups of individuals are considered beneficial owners of a reporting company. First, any individual who directly
or indirectly owns or controls at least 25% of the ownership interests of the reporting company. Beneficial ownership
looks through corporate structures to identify the individuals who indirectly own a reporting company. For example,
if a reporting company has a corporate shareholder, the individual owners of the corporate shareholder will be treated as beneficial owners of the reporting company if they beneficially own at least 25% of the reporting company.

Second, any individual who exercises substantial control over the reporting company will be treated as a beneficial
owner whether or not they have any actual ownership interests. Individuals with substantial control are those with
substantial influence over important decisions about a reporting company’s business, finances, and structure. Senior officers (president, CFO, general counsel, CEO, COO, and any other officer who performs a similar function) are automatically deemed to have substantial control, as are individuals with the authority to appoint or remove senior officers and board members. There is no requirement that these individuals have actual ownership in the company to be considered a beneficial owner for reporting purposes.

Initial Information to be Provided

For Reporting Companies formed on or after January 1, 2024, the report must also include information about the
“Company Applicant”, the person who filed or directed the filing on behalf of the Reporting Company.
Information for Reporting Companies. (i) Formal entity name, (ii) current address, (iii) State of formation, (iv) IRS
taxpayer identification number, and (v) identification of up to 2 Company Applicants (if applicable).
Information for Beneficial Owners & Company Applicants. (i) The individual’s legal name, (ii) date of birth, (iii) current address, and (iv) a photograph of an unexpired ID (e.g., a driver’s license or passport). Generally, all of this information is included on a driver’s license, but it will need to be confirmed that it is accurate.

Filing Deadlines

Reporting Company registered/formed before 2024: January 1, 2025.

Reporting Company registered/formed during 2024: Within 90 days of formation/registration.

Reporting Company registered/formed after 2024: Within 30 days of formation/registration.

Required Updates to Information

If any of the information previously reported changes (e.g., a change in ownership that results in new or different Beneficial Owners or a change in the employees who exercise substantial control), the Reporting Company must file an updated report within 30 days of the change and the information on the new Beneficial Owner(s) must be provided
to FinCEN.

Access to Information

The information provided to FinCEN will be uploaded to a non-public database. The only persons with access to this information are (a) Federal, State, local, and Tribal officials for authorized activities related to national security, intelligence, and law enforcement, and (b) financial institutions, but only in limited in certain circumstances and with
the consent of the Reporting Company.


Significant penalties apply for Reporting Companies and Beneficial Owners who or which do not comply with the CTA, including (i) a civil penalty of $591 for each day of non-compliance (subject to annual inflation adjustments) and/or (ii) criminal penalties of up to a $10,000 fine or 2 years in jail.

Compliance Reporting Services.

Various service companies have created systems to assist Reporting Companies with the filing of CTA reports.


The foregoing is a summary of the CTA and was provided for informational purposes. This is not intended as legal
advice for any particular client or entity. More detailed and nuanced rules not explained above may apply in many
situations. Crady, Jewett, McCulley & Houren LLP and its attorneys are not responsible for a Reporting Company’s
CTA compliance obligations.