So whose bidding is Joe doing?
China or Ukraine?
The Corporate Transparency Act: New Reporting Requirements for Businesses
On January 1, 2021, Congress enacted the Corporate Transparency Act (codified as 31 U.S.C. §5336) (“CTA”) within the larger National Defense Authorization Act (“NDAA”). The NDAA authorized funds for the Department of Defense, the military, the Department of Energy, and other matters relating to financial intelligence, money laundering, and homeland security. The CTA, despite being a small portion of the NDAA, stands to be a “big deal” for private companies.
Beginning January 1, 2024, businesses formed in the U.S. or foreign businesses that operate in the U.S. may be required to report information about the company’s “beneficial owners” (i.e., the people who own or control it) to the U.S. Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”). Historically, FinCEN has been tasked with national security relating to financial matters. The new reporting requirements are similarly geared to preventing criminals from using companies for money laundering, corruption, tax evasion, drug trafficking, fraud, and other crimes. Essentially, it signals the end of anonymous shell companies whose owners are concealed from the U.S. government.
Who is required to report? The CTA governs corporations, limited liability companies (“LLCs”), and similar legal entities that are required to be registered with a state secretary of state or similar office. 31 U.S.C. §5336(a)(11)(A). In Illinois, the Secretary of State governs corporations, not-for-profit (“NFP”) corporations, LLCs, limited partnerships (“LPs”), and limited liability partnerships (“LLPs”). The Illinois Secretary of State does not register sole proprietorships, general partnerships, or trusts.
Who is exempt from reporting requirements? The CTA contains 23 different categories of entities that are exempt from reporting requirements, including banks, credit unions, tax-exempt entities registered with the IRS, public utilities, and some types of larger companies. 31 U.S.C. §5336(a)(11)(B). The exemptions generally cover entities that are already subject to oversight by another federal or state agency or law, such as most insurance companies, investment advisors and broker-dealers, and certain public accountants.
What information must be disclosed? FinCEN is developing a disclosure form to cover the categories of information required to be reported by the CTA, which include information about the company, its beneficial owners, and the individuals that formed the company (if different). The company must state its legal name and any trade name(s), the U.S. business address, the jurisdiction in which the company was formed (if domestic) or registered (if foreign), and the Taxpayer Identification Number (“TIN”) assigned by the IRS. For each beneficial owner and company applicant, the company must provide the person’s legal name, birth date, home address (unless the person is an attorney or corporate formation agent forming the company in the course of his or her business), identifying number (e.g., driver’s license, state identification card, passport, etc.), and a copy of the photo identification document. 31 U.S.C. §5336(b); 31 C.F.R. §1010.380(b).
Who is a “beneficial owner”? The CTA defines the term “beneficial owner” as any individual who exercises substantial control over the reporting company, or who owns or controls at least 25% of the company. 31 U.S.C. §5336(a)(3). Those with “substantial control” may include persons who hold executive positions or offices, or are authorized to make important decisions for the company, even if they are not owners. In FinCEN’s published examples, titles such as CEO, CFO, COO, President, and general counsel are “beneficial owners” because they are senior officers entitled to exercise substantial control over the company. See also 31 C.F.R. §1010.380(d).
More below
https://www.gcklegal.com/the-corporate-transparency-act-new-reporting-requirements-for-businesses/