New Mandatory Reporting Requirements for LLC’s and Corporations
Udall Shumway represents Limited Liability Companies and Corporations in their formation, as statutory agents, and in tax, business, and litigation matters. We want to let our clients and other businesses know about new federal reporting requirements that take effect on January 1, 2022.
In 2020, Congress passed, and President Trump signed the “Corporate Transparency Act” (the “CTA”). The purpose of the Act is to prevent money laundering and other illegal activity by small companies. Usually, the federal government excludes small businesses from laws because of the burden on them. The CTA does the opposite, as it applies to businesses with fewer than 20 employees or less than $5 million in annual revenue.
The CTA is aimed at preventing small companies from hiding their ownership. It requires companies to complete forms that disclose the members or shareholders of companies that own 25% or more of the membership interests in an LLC or shares of a corporation. Companies are also required to update their reporting if ownership changes. The reporting will include legal names, dates of birth, addresses and identification numbers like Social Security numbers.
The information will be available to federal, state, and local law enforcement agencies. The Financial Crimes Enforcement Network (“FinCEN”), a unit of the Treasury Department will maintain the database. The public will not have access to the information, but banks and other financial institutions can access the information if they have the companies’ consent.
Failure to report can result in civil penalties of up to $10,000.00.
Although the CTA is effective as of January 1, 2022, the reporting requirements will only become mandatory two years after FinCEN publishes its regulations and makes the forms available.
If you believe you may be subject to the CTA and would like our assistance in determining its applicability to you, please contact Udall Shumway’s business and transaction attorneys.
This blog should be used for informational purposes only. It does not create an attorney-client relationship with any reader and should not be construed as legal advice. If you need legal advice please feel free to contact us at 480.461.5300. Udall Shumway PLC is located in Mesa, Arizona and is a full service law firm. We assist Individuals, families, businesses, schools and municipalities in Mesa and the East Valley.