DISCLAIMER: THE INFORMATION CONTAINED HEREIN IS SOLELY FOR EDUCATIONAL PURPOSES. IT IS NOT LEGAL ADVICE OR LEGAL AUTHORITY AND REPRESENTS ONLY THE AUTHOR’S INTERPRETATION OF THE NE CORPORATE TRANSPARENCY ACT.
You are running out of time to comply with the Corporate Transparency Act!
Never heard of the Corporate Transparency Act (CTA)? Let me explain!
The CTA is a federal law aimed at combating money laundering, terrorism financing, and other illicit activities by requiring certain companies to report their beneficial ownership information to the Financial Crimes Enforcement Network (FinCEN) of the U.S. Department of the Treasury. The CTA imposes reporting requirements on certain “reporting companies,” which include corporations, limited liability companies (LLCs), and similar entities formed under the laws of any state or foreign jurisdiction and registered to do business in the United States. It is imperative to comply with the CTA as the penalties for providing false information or failing to report can result in a civil penalty of $500.00 per day until the violation is remedied and a criminal fine of up to $10,000 and/or two (2) years imprisonment.
In Nebraska, compliance with the Corporate Transparency Act primarily involves ensuring that applicable entities fulfill their reporting obligations to FinCEN. Here are steps to comply with the CTA:
- Determine Reporting Obligations: Determine whether your company falls under the definition of a “reporting company” under the CTA. Generally, reporting companies are entities formed or registered to do business in the United States by filing a document with the Secretary of State.
- Identify Beneficial Owners: Identify and collect information about the beneficial owners of your company. Beneficial owners are individuals who own 25% or more of the reporting company OR have substantial control over the reporting company. Individuals who hold titles such as president, vice president, or treasurer of a corporation would have substantial control over the entity even though they may not be owners. This would categorize them as beneficial owners under the CTA. The CTA requires reporting companies to report information about their beneficial owners to FinCEN.
- Identify Company Applicants: If the reporting company was created on or after January 1, 2024, the CTA requires you to report company applicants. Only two (2) individuals are allowed to be reported to FinCEN as a company applicant. A company applicant is a person who either directly files the document that creates or registers the reporting company or is primarily responsible for directing or controlling such filing. For example, company applicants may be the reporting company’s attorney and paralegal. The attorney would direct the filing and the paralegal would perform the filing.
- Submit Report to FinCEN: Reporting companies must submit a report to FinCEN containing certain information about the company and its beneficial owners. This information typically includes a tax identification number associated with the reporting company as well as its principal place of business address. Beneficial owners must report his or her full legal name, date of birth, residential address, and a unique identifying number from an acceptable identification document (such as a driver’s license or passport) with an attached image of such document. Company applicants are required to report the same information as beneficial owners with the exception that they may use their business address rather than their residential address. Be sure to save your filing receipt once your report has been successfully filed for your records.
- Maintain Records: Keep accurate and up-to-date records of beneficial ownership information for your company. The CTA requires reporting companies to maintain records of beneficial ownership information for at least five years after the date of the cessation of the company’s status as a reporting company.
- Designate Compliance Officer: Designate a compliance officer or responsible individual within your organization to oversee compliance with the CTA. This individual will be responsible for collecting and maintaining beneficial ownership information, submitting reports to FinCEN, and ensuring ongoing compliance with the law.
- Monitor Changes in Ownership or Control: Regularly monitor changes in ownership or control of your company and update beneficial ownership information as necessary. Reporting companies are required to update their reports to FinCEN within thirty (30) days of any change in beneficial ownership information. However, Company applicant information is NOT required to be updated once it is initially reported to FinCEN.
- Training and Education: Provide training and education to relevant personnel within your organization to ensure awareness of the requirements and procedures for complying with the CTA.
It’s essential to stay informed about any updates or guidance issued by FinCEN regarding the implementation of the Corporate Transparency Act. Additionally, consulting with legal counsel or compliance professionals can provide guidance tailored to your specific circumstances and help ensure compliance with the law.
