The (Not Only) Corporate Transparency Act

Michael Mulcahy

Feb 7

Yes, effective January 1, 2024, the Corporate Transparency Act came into effect, and if you’re a business owner or even if you own or operate an entity, you could be affected. Here’s a high-level overview of the Corporate Transparency Act to help you avoid potentially costly fees, fines and penalties.

What is the Corporate Transparency Act?

It aims to increase the transparency of the control individuals and beneficial owners of various entity structures in the name of increasing national security and protecting US commerce. It requires that Reporting Companies disclose information about the entity, the beneficial owners and the registering agent or equivalent to the Financial Crimes Enforcement Network (FinCen), part of the Department of Treasury.

What is a Reporting Company?

A Reporting Company is defined as “a corporation, LLC or other similar entity” filed in the United States or in business in the United States. That “similar entity” is important as it includes limited partnerships (such as family limited partnerships), limited liability partnerships and business trusts. If a trust owns 25% or more of a reporting company (or has substantial control), it may need to disclose itself, the trustee as well as the beneficial owners. There are some exclusions for large operating companies, nonprofits and other already regulated entities.

What information must be disclosed?

Your full legal name and date of birth
Each beneficial owners’ current residential address (a beneficial owner owns 25% or more, or exercises substantial control over the company such as a CEO, COO, etc.)
Each registering agent current business address
Identification number such as driver’s license or passport

When is this due?

If you’re an existing reporting company, January 1, 2025.

If you’re forming a new entity, you have 90 days in 2024 to comply and 30 days in 2025 and beyond.

Penalties for Failure

There are penalties for failing to comply with this act. There is a potential civil penalty of $500/day, and a criminal fine of up to $10,000 and/or 2 years of imprisonment.

What Should You Do?

If you have a complex estate with limited partnerships, LLCs or trusts, you should review this act to see if this disclosure rules and regulations may impact you. This is not a comprehensive review of the Corporate Transparency Act – just some highlights. If you have any questions, you can reach out to our team, and we can help you navigate these questions. You may want to ask your CPA and/or attorney as many of these businesses are offering to make any necessary filings on your behalf.

Here are some helpful resources:

https://www.sos.state.tx.us/corp/cta.shtml

https://www.foley.com/insights/publications/2024/01/new-reporting-requirements-corporate-transparency-act/

https://www.fincen.gov/news/news-releases/us-beneficial-ownership-information-registry-now-accepting-reports

Here’s the actual rule:

https://www.federalregister.gov/documents/2023/12/22/2023-27973/beneficial-ownership-information-access-and-safeguards

https://www.fincen.gov/news/news-releases/fincen-issues-final-rule-regarding-access-beneficial-ownership-information

Michael Mulcahy, CFA®, CPWA®

Michael serves as a Vice President of Kings Path where he provides portfolio design and planning services to help families and foundations achieve their financial and legacy goals. Michael has a passion for developing tax-saving investment and asset location strategies, consulting on the development of estate structures, building and communicating business succession plans and coordinating philanthropic projects for business owners and generous givers.

Prior to joining Kings Path, he was a Senior Investment Analyst at Salient Partners where he worked across different strategies including the following: leveraged credit, value-oriented US equities, covered call and long-short tech-sector. Additionally, Michael worked on special projects where he assisted with capital financing projects, strategic acquisitions, and business unit sales.

Michael received his bachelor’s degree in business honors and finance from Texas A&M University, graduating cum laude. He is a CFA® charterholder and a CPWA® professional through study at University of Chicago Booth School of business. He is a member of the Investments & Wealth Institute® and the CFA Society of Houston.

Michael serves on the board of Vision Inspired Foundation which he helped found in 2017. Happy to be back in his hometown, Michael lives in Sugar Land with his wife, Jordan and two daughters.

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