The U.S. Congress passed a ground-breaking new law, the Corporate Transparency Act (CTA) which will soon go into effect. We'll tell you what's important to make sure you're prepared and meet your reporting obligations:

What is the purpose of the CTA?
To combat money laundering, tax evasion and terrorist financing.

Which companies are affected?
All companies incorporated with one of the 50 Secretaries of State. This includes all corporations and LLCs. It does not include, for example, trusts (a type of trust) and general partnerships (equivalent to a GbR or OHg). Also excluded are foreign companies. In addition, there are 23 other exceptions.

What does the CTA require of me?
Companies required to report must disclose all direct or indirect owners of at least 25% of the shares. In addition, such individuals who have substantial control over the company must be disclosed. This includes all officers, the board of directors, and the authorized signatories of the parent company. Names, dates of birth, place of residence and passport information (including copy of ID) are requested.

Who receives the information?
The Financial Crimes Enforcement Network ("FinCEN") at the U.S. Treasury. Access is also provided to law enforcement agencies, financial institutions, and other authorized persons, including foreign tax authorities.

What is the cost of filing the report?
FinCEN fees are not known at this time.

When does the law go into effect?
January 1, 2024

When do I need to file the report?
Companies formed before the effective date have one full year until January 1, 2025, to file their reports. In contrast, companies incorporated after January 1, 2024, have only 14 days.

Where do I file the report?
The filing is done electronically. The system is currently being developed by FinCEN.

Is it a one-time report or does the CTA create a recurring obligation?
There is no set frequency as of yet. What is certain, however, is that any changes among the relevant persons must be disclosed.

What happens if I file the report late or not at all?
Violators face civil penalties of up to $500 per day. Criminally, one could face up to 2 years in prison and up to a $10,000 fine. A timely filing of incorrect information will go unpunished if corrected within 90 days of filing.

What else should be considered?
Avoid a breach of the European General Data Protection Regulation by taking additional measures. Feel free to contact us about this to protect yourself from this. In addition, we recommend adjusting corporate bylaws/operating agreements to mitigate the risk for U.S. companies.

Recommendation
Please contact us to evaluate whether your company is affected by the law, whether exemptions exist or can be achieved. We are also happy to assist in training your compliance staff and will offer several webinars on this topic.