INVESTOR RESOURCES
TRANSPARENCY
2022’s New Legal Requirement: The Corporate Transparency Act BE READY TO REPORT
by Garrett Sutton, Corporate Direct
are a very serious and challenging loophole within our existing legal framework and that the self-reporting of almost every single entity in the country is necessary to combat this widespread societal scourge.
he U.S. Government wants to know who owns your business. The Corporate Transparency Act (“CTA”)
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requires, as of January 2022, entities defined as reporting companies to report key information about their beneficial owners. The information will be held in a ‘secure’ data- base maintained by the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”). Before this legislation companies did not have an obli- gation to report their true owners. As long as the com- pany paid their taxes there wasn’t much of an issue. But lately numerous law enforcement agencies and others in government have been shocked by an apparent improper wave of money laundering. As a result, every single entity in the U.S. (with only a few exceptions) must annually report their beneficial owners to the federal government or face significant penalties. Not all of the regulations have been finalized but one thing is clear: This law includes every business owner and real estate investor using an entity for asset protection. This law includes you. BACKGROUND The CTA was enacted by both houses of Congress on January 1, 2021, as part of the National Defense Autho- rization Act of 2021. When senators and representatives are asked to approve spending for defending the country and paying the salaries of our fine men and women in uniform you often get a patch work of unrelated bills (that may never be passed on their own merits) attached for the legislature ride. The CTA relates not to boots or bat- tleships but to money laundering. Specifically, the CTA is an amendment to the Anti-Mon - ey Laundering Act of 2020, and it seeks to discourage the use of ‘shell companies’ by mandating the transparency of every entity newly formed or already in existence. Con- gress has determined that anonymous shell companies
REQUIRED REPORTING A reporting company obligated to report annually to FinCEN is a corporation, limited liability company, limited partnership or similar entity which is chartered by filing with a secretary of state, tribal office (or comparable commission) or is formed in a foreign country and quali- fied to do business in the United States. Beneficial ownership under the CTA is defined as any individual who directly or indirectly (i.e. through a second entity) exercises substantial control over an entity AND owns or controls at least 25% of the ownership participa- tion (i.e. stock or membership interests) in the company. The information required for the reporting (as of this writing) of beneficial owners includes: • Full Name • Date of Birth • Current Residential or Business address; and • A unique identifying number from a state-issues iden- tification document (ID) This may include a passport, driver’s license, or a FinCEN identifier. Given legitimate concerns about the privacy of such information, it is claimed that the FinCEN database will feature strictly limited access. Those with entry will be federal agencies (the FBI), non-US law enforcement (Interpol) and state and local law enforcement agencies with a warrant. Many of our clients set up Wyoming LLCs for their privacy features. The Wyoming Secretary of State does
20 | think realty magazine :: january – february 2022
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