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Corporate Transparency Act Effective January 1, 2024

November 16, 2023

The federal Corporate Transparency Act will apply to all domestic entities, including corporations, limited liability companies and limited partnership effective January 1, 2024.

‒ By Reid A. Godbolt, Esq.

Effective January 1, 2024, the federal Corporate Transparency Act (CTA) will apply to all U.S. domestic entities, including corporations, limited liability companies and limited partnerships. This will also apply to foreign entities doing business in the United States, unless an exemption applies to the entity.

The CTA is intended to assist law enforcement in combatting money laundering, tax fraud, financing of terrorism and other illicit activity through anonymous shell and front companies. There are 23 types of entities that are exempt from the CTA reporting obligation. Those entities that are already subject to other substantial federal reporting requirements (and includes public companies, banks, securities brokers and dealers, insurance companies and registered investment companies and their investment advisors) are exempt.

Another significant exemption is for large operating companies with more than 20 full-time US employees, an operating location in the US, and more than $5.0 million in gross receipts or sales from US sources, as reported on the prior fiscal year tax return. Certain tax-exempt entities, wholly-owned subsidiaries and inactive entities are also exempt.

REPORTING REQUIREMENTS

The new reporting requirements require entities to file Beneficial Ownership Information (BOI report) with the federal Financial Crimes Enforcement Network (FinCEN). The BOI report includes information on the individuals exerting substantial control over the entity or with a 25% ownership interest in the entity, whether direct or indirect. The CTA and the rules provide certain civil and criminal penalties for entities that do not file the BOI reports accurately and timely, and those penalties also apply to any Beneficial Owner who fails to provide accurate and complete personal information for the BOI reports.

Rules further governing the CTA are still being finalized by FinCEN and we will keep you updated on any additional changes. Please contact Jones & Keller, PC directly if you need assistance in determining whether your entity is exempt and/or filing your BOI reports.

This memorandum is not legal advice. If you have any questions concerning the above, feel free to contact any member of the Corporate and Securities Practice Group.

 

This article is provided for information purposes only and is not intended to constitute legal advice or legal opinion as to any situation. You should not take, or refrain from taking, any action based on information in this article, without seeking legal counsel from an attorney on your particular facts and circumstances. Jones & Keller would be happy to provide you with specific advice about specific situations if desired. Do not hesitate to contact us.

About Reid Godbolt

Reid A. Godbolt is a shareholder and member of the Corporate Securities Practice Group at the Denver, Colorado, law firm of Jones & Keller, P.C. Much of Reid’s experience over his 40+ years with Jones & Keller has been in securities regulation, capital formation, mergers and acquisitions and representation of issuers and underwriters in public and private offerings of securities in several industries including energy, insurance, technology and pooled investment vehicles such as hedge funds, private equity funds and mutual funds. He also represents executives and boards of directors in connection with sales of control and investigations. Reach out to Reid at rgodbolt@joneskeller.com.