THE CORPORATE TRANSPARENCY ACT: YOUR QUESTIONS, ANSWERED By Adam M. Beaudoin and Matthew A. Jones
C
onfused by what you've read about the Corporate Transparency Act?
You're not alone. Read on to learn what it is, who it applies to, what it will do, and the requirements for compliance. WHAT IS THE CORPORATE TRANSPARENCY ACT? The Corporate Transparency Act was created to provide law enforcement with beneficial ownership information related to specific business entities to detect, prevent, and punish terrorism, money laundering, and other misconduct. WHEN DOES THE CORPORATE TRANSPARENCY ACT TAKE EFFECT? The Corporate Transparency Act will go into effect on January 1, 2024. Reporting entities created before the end of 2023 will have until January 1, 2025, to file beneficial ownership information. For companies registered after January 1, 2024, the requirement for filing ownership information is 30 days after the proposed registration, but there are proposed regulations that would extend the reporting time to 90 days, with the 30-day reporting period not going into effect until January 1, 2025. WHICH COMPANIES NEED TO FILE BENEFICIAL OWNER INFORMATION UNDER THE CORPORATE TRANSPARENCY ACT? The Corporate Transparency Act applies to a variety of domestic reporting companies, including corporations, LLCs, LLPs, LLLPs, LPs, non-profit corporations, and business trusts, as well as any other entity that is created by the filing of a document with the Secretary of State or Native American tribe.
20
B U S I N E S S
Ward_and_Smith_spread_Dec2023.indd 20
N O R T H
C A R O L I N A
Any foreign company doing business in the US with a physical location in the US will also need to file ownership information under the Act. WHAT COMPANIES ARE EXEMPT FROM FILING UNDER THE CORPORATE TRANSPARENCY ACT? There are 23 exemptions from the definition of "Reporting Company" in the Corporate Transparency Act. Companies in already heavily regulated industries, such as insurance, banking, financial brokerages, exchanges, clearing agencies, public accounting firms, political organizers, investment advisors, investment companies who pooled investment rewards, accountants, and Commodity Exchange Act registered agencies, are typically going to be exempt. However, most importantly, large domestic corporations with at least 20 employees AND tax returns showing more than $5 million in gross receipts or sales will be exempt from the Act. ARE NON-PROFITS EXEMPT FROM FILING FOR THE CORPORATE TRANSPARENCY ACT? Various tax-exempt entities and entities assisting tax-exempt entities are also not required to report ownership information (tax-exempt entities are generally formed as non-profits). To be tax-exempt under the Corporate Transparency Act, the entity must be a 501(c) and exempt under 501(a) of the code. ARE COMMUNITY ASSOCIATIONS OR HOMEOWNERS ASSOCIATIONS EXEMPT FROM FILING WITH THE CORPORATE TRANSPARENCY ACT? Not at this time. Community Associations organized under 528 will be subject to the Act. Only Community Associations organized under 501(c)(4) or under 501(c)(7) will be exempt. SPONSORED SECTION
11/16/23 11:42 AM