In accordance with the Corporate Transparency Act (CTA), starting January 1, 2024, companies in the United States will be required to comply with new rules related to reporting beneficial ownership information. This regulation mandates that certain companies disclose details about their beneficial owners to the Financial Crimes Enforcement Network (FinCEN). A “beneficial owner” is defined as an individual who owns at least 25% of the company or who has substantial control, as set forth in the new legislation. The aim of this regulation is to increase financial transparency and help combat money laundering and other illicit activities.
Companies subject to these new rules include corporations and LLCs formed under U.S. laws, as well as foreign companies registered to operate in the U.S. However, certain entities, such as banks, large corporations, and specific regulated organizations, are exempt from these requirements. DR Asset Planning, for instance, emphasizes that all companies under its management will need to report this information.
The report must include detailed information about the entity (such as its legal name, EIN, and U.S. address), as well as information about the beneficial owners (names, birthdates, addresses, and government identification numbers of individuals who meet the criteria). If applicable, it should also include details about the individuals responsible for establishing the company (for companies formed after January 1, 2024). Companies formed after this date have up to 30 days to submit the data, while companies created before January 1, 2024, must comply by January 1, 2025.
According to the law’s definition, in alignment with international standards, beneficial owners are those who hold 25% or more of the company’s shares or who exert significant control over it. Certain individuals, such as minors (represented by parents) and intermediaries, are excluded from this definition. In cases of indirect ownership, the percentage of control is calculated proportionally.
To comply with the new guidelines, FinCEN advises that reports be submitted electronically, with access restricted to authorized users. Penalties for non-compliance may include daily fines of up to $500, and for knowingly submitting false information, penalties could be as high as $10,000 and up to two years in prison.
This requirement marks a significant shift for U.S. companies, especially smaller ones that may not have previously faced such regulations. The goal is greater transparency, which strengthens trust and adherence to international financial standards. To ensure compliance, it is critical to monitor ownership changes and submit the necessary information within the required deadlines.
DR Asset Planning guarantees that it will handle all reporting for the companies under its management and offers specialized support for external companies needing assistance with adapting to this new obligation.
Contact us for more information.
Published on November 11, 2024