Page 20 - BusinessWest July 24, 2023

Roadmap for Reporting
Corporate Transparency Act Generates New Requirements
BY JENNIFER SHARROW, ESQ.
“This new reporting system is like nothing that has ever been required for the majority of businesses, either locally or elsewhere in the country.”
Businesses, get ready. The federal government is implement- ing new reporting requirements that will bring even the smallest businesses under the purview of the U.S. Depart-
ment of Treasury. All entities registered with a secretary of state are now required to make mandatory reports which require spe- cific and detailed information, and a failure to file these reports can result in serious penalties.
This new reporting system is like nothing that has ever been required for the majority of businesses, either locally or else- where in the country, but the passing of the Corporate Transpar- ency Act (CTA) represents a fundamental change to the informa- tion that must be provided to the federal government by small businesses and single-purpose limited liability companies and corporations.
The Corporate Transparency Act was passed in 2021 as part of a suite of efforts from the federal government to crack down on money laundering across various parts of the economy. The CTA specifically targets efforts to hide monies under the guise of com- plicated corporate entity structuring. Whereas these entities pre- viously enjoyed a significant amount of privacy regarding matters of ownership, under the CTA, these entities will now be required to disclose detailed, personal information about their beneficial ownership.
Every small-business owner, and every business that assists in the formation and annual reporting requirements of the business, needs to know about this new reporting requirement, as non- compliance can result in substantial penalties of $500 a day up to
$10,000, and up to two years in jail.
Who Needs to File?
While certain exemptions are available within the statute, in general, any corporation, limited-liability company, or any similar entity formed by a filing with the secretary of state needs to file reports with the U.S. Department of Treasury’s Financial Crimes Enforcement Network (FinCEN). This requirement applies to most small businesses, fund-manager entities, and real-estate holding companies.
Additionally, FinCEN is gathering information on what is described in the CTA as the ‘company applicant’ — the person
or organization who actually files the paperwork on behalf of the entity. For law firms, where formation documents are generally filed by a paralegal, FinCEN will require information on both the paralegal and their supervising attorney. For other service com- panies, this will be information on the specific person filing the organizational paperwork.
There are 23 exemptions from the CTA reporting require- ments. Most exemptions are for entities that are already subject to considerable federal or state regulation. Examples of exempt entities include publicly traded companies and other entities
that file reports with the SEC, tax-exempt entities, banks, credit unions, money-services businesses, insurance companies, securi- ties brokers and dealers, state-licensed insurance producers, pub- lic utilities, and accounting firms.
There is also an exemption for what’s called a ‘large operat-
Here’s To
75 Years
Of Making
It Count.
MBK is proud to celebrate 75 years of partnering with the local business community. Here’s to 75 more!
413-536-8510 | mbkcpa.com
20 JULY 24, 2023
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