Many business owners and business lawyers are making a resolution in 2023 to get ready to comply with the Corporate Transparency Act.
The Corporate Transparency Act takes effect January 1, 2024, but waiting until then to begin compliance preparations would be a mistake.
Beginning January 1, 2024, any newly-formed reporting company will have only 30 calendar days to file an initial beneficial ownership report.
Reporting companies formed during 2023 or earlier will have until January 1, 2025 to file their first CTA reports.
Each beneficial ownership report will need to include five pieces of personally identifiable information about the reporting company's beneficial owners: (1) full legal name, (2) date of birth, (3) home residential address, (4) a unique identifying number (drivers license or passport), and (5) an image of the document that provides the unique identifying number.
Companies formed on January 1, 2024 or later will also need to include these same five pieces of personally identifiable information about the reporting company's "company applicant." The CTA defines "company applicant" as the individual who signed or was primarily responsible for the filing of the document that formed the reporting company (or that caused it to be registered to do business, in the case of a foreign reporting company).
What Businesses Should Do in 2023
In 2023, to prepare for the Corporate Transparency Act, business owners and business lawyers should:
- Consult an attorney to determine if the entity is a "reporting company" as defined in the CTA;
- Evaluate whether the company is exempt from reporting under one of the 23 exemptions found in the CTA;
- Amend the company's governance documents (like a shareholders agreement for a corporation, or an operating agreement for a LLC) to empower a compliance officer and to obligate company owners to provide their personally identifiable information to the company for compliance purposes;
- Determine who are the company's beneficial owners;
- Establish a timeline for filing the company's initial report; and
- Establish a procedure for monitoring changes in previously-reported data so that the company can file an amendment within 30 calendar days after any change.
While business owners might be able to rest easy in 2023, they should start preparing for the challenging new world of CTA compliance that is now less than one year away.