Corporate Transparency Act

There is a new federal law that will affect many small businesses in the United States. The law is called the Corporate Transparency Act (“CTA”) and it requires entities registered within the United States (through various state agencies) to report their beneficial ownership information to the Financial Crimes Enforcement Network (FinCEN) starting from January 1, 2024. The purpose of the CTA is to prevent and combat money laundering, terrorism financing, tax evasion, and other illicit activities through business entities. Due to the legal nature of these rules, currently HKP is unfortunately unable to help our clients with the reporting of the CTA and we recommend you consult an attorney to assist with these rules and filings.

The CTA applies to any corporation, limited liability company (LLC), or similar entity that is:

  • Created by the filing of a document with a secretary of state or a similar office under the law of a state or Indian tribe, or
  • Formed under the law of a foreign country and registered to do business in the United States by the filing of a document with a secretary of state or a similar office.
  • Although generally, a wholly owned LLC is considered disregarded for income tax purposes; the CTA also applies to these wholly owned LLCs that do not file tax returns separately from its owner.

A beneficial owner is an individual who, directly or indirectly, either:

  • Exercises substantial control over the entity, or
  • Owns or controls at least 25% of the ownership interests of the entity.

The CTA provides many exemptions for certain types of entities that are already subject to federal or state regulation or disclosure requirements.

Some of the exempt entities include:

  • Publicly traded companies
  • Banks, credit unions, and other financial institutions
  • Insurance companies
  • Accounting firms
  • Nonprofit organizations
  • Large operating companies that have more than 20 full-time employees, more than $5 million in gross receipts or sales, and a physical presence in the United States.

For a complete list of exemptions, please refer to the CTA or the final rule issued by FinCEN.

There are significant penalties for ignoring the filing rules or by filing past the deadline. As previously mentioned, due to the legal nature of the CTA and its reporting requirements, we are unable to assist you with the compliance process of the CTA. We recommend that you consult with an attorney who can advise you on whether you are subject to the CTA and how to file the required reports with FinCEN. As your trusted business advisors and CPA’s, we want to make sure you are aware of this new law and its possible implications for your business entities.

We appreciate your business and we are here to help you with any other accounting or tax-related matters.

Please do not hesitate to contact us if you have any questions or concerns.

/ trusted / skilled / committed /