The US Corporate Transparency Act – compliance, exemptions and penalties

21 March 2024 / Insight posted in Article

The Corporate Transparency Act came into effect in the US on 1 January 2024. Personal details, such as names and addresses, of those who exercise substantial control or are 25% beneficial owners of US entities and foreign entities that are registered to do business in the US, must be reported to the Financial Crimes Enforcement Network. We need to consider a group structure chart to identify the ultimate individual owner unless they only hold their interest through an exempt parent company.  

It’s an informational filing, due by 1 January 2025 for a business in existence pre-2024 and within 90 days if formed during 2024 or 30 days if formed later.  

Additionally, companies are required to report information about themselves including their legal name, trade name, their US place of business, where formed/registered, taxpayer identification number and confirmation of whether it is filing an initial report or amendment. The information will not be publicly available but upon request by several parties, including federal, state, local and tribal officials, foreign officials and some financial institutions and their regulators. 

There are several exemptions, which are automatic, so no action need be taken if exempt. However, if the exemption ceases to apply, you need to take immediate action and file within 30 days. 

Civil violation penalties are up to $500 for each day that the violation continues. More severe are the criminal penalties of up to two years’ imprisonment and a fine of up to $10,000. Potential violations include wilfully failing to file a beneficial ownership information report, wilfully filing false beneficial ownership information, or wilfully failing to correct or update previously reported beneficial ownership information. 

It is important that you consider this as soon as possible, as going up the chain is difficult and time-consuming. The window is now open for filings and they can be filed early where the information is available. 

The beneficial ownership information reporting under the Corporate Transparency Act filing is incredibly complex in certain scenarios, so it is worth investing in doing it correctly. This will ensure regulatory compliance and avoid mistakes, amendments and penalties.  

If you would like to know more about the Corporate Transparency Act, including the detailed criteria of exemptions, feel free to contact our team. 

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