The Corporate Transparency Act (CTA) requires certain business entities ("reporting company") to disclose information, including data about their "beneficial owners," to the U.S. Treasury Department's Financial Crimes Enforcement Network (FinCEN). If your trust owns business interests (domestic or foreign), the CTA might apply to you. The CTA came into effect on January 1, 2024, and its deadlines are fast approaching.
Trusts that Own Business Interests
If the business held by your trust is one of the estimated 36 million American businesses considered a "reporting company" under CTA, you will need to understand what "beneficial ownership information" (BOI) about your company must be disclosed to the federal government and when you need to do so. The owners, managers, and advisers of every LLC, corporation, and other entity - whether already existing or one they are planning to create in the future - need to consider whether that entity is required to file a report.
A "reporting company" includes most entities formed in or registered to do business in the United States. However, the act also creates numerous exemptions, which exclude certain categories of entities.
"Beneficial owners" for purposes of the CTA are individuals that either: (i) exercise substantial control (directly or indirectly) over a reporting company, or (ii) own (directly or indirectly) at least 25% of the ownership interest of a reporting company.
FinCEN was created in 1990 to support federal, state, local, and international law enforcement by analyzing the information required under the Bank Secrecy Act (BSA), one of the nation's most important tools in the fight against money laundering. Small businesses are a popular target for money launderers, as they invest in or operate cash-intensive businesses in order to mix their illegal proceeds with legitimate income.
Since this law may be applicable to many of our clients, Mortensen & Reinheimer PC would like to keep you informed. All clients to whom the CTA and BOI reporting apply, need to file reports themselves or work with separate legal counsel (Mortensen & Reinheimer PC will not do any client reporting compliance, since our area of expertise is estate planning law and not business/corporate law; we are simply providing this information to help support our clients). If legal assistance is necessary, we suggest that clients contact their business/corporate law attorney.
Next Steps?
Some steps to consider should include talking with your business/corporate attorney about:
- CTA's reporting requirements
- How to determine whether your business is a non-exempt Reporting Company
- What information needs to be reported to FinCEN
- Compliance deadlines for different categories of covered entities
If you need referrals to business/corporate attorneys, please feel free to contact us.
Additional Details
For those clients who seek to learn more about the CTA, FinCEN and BOI, here is some additional information (these links do not act as recommendations; we are simply providing these links as resources):
- FinCEN's beneficial ownership information reporting rule - a quick review
- Q&A on the CTA
- CTA: Beneficial Ownership Disclosure Obligations
- Beneficial Ownership Information U.S. Treasury)
About the author:
W. Robert Price, Esq., is President of Mortensen & Reinheimer, PC. He is a member of the American Bar Association, the Orange County Bar Association, and the Society of Chartered Property and Casualty Underwriters. He is a California licensed Fire & Casualty Broker-Agent, a California licensed Life & Health Insurance Agent, and has an MBA from Pepperdine University. Contact Robert at wrobertpriceesq@yahoo.com.