Congress enacted the Corporate Transparency Act (CTA) as a tool of the Financial Crimes Enforcement Network (“FinCEN”) “to help prevent and combat money laundering, terrorist financing, tax fraud, and other illicit activity”. Any willful failure to comply with the CTA’s reporting requirements can result in significant civil and criminal penalties.

Most small businesses created or registered to do business in the United States (“reporting companies”) will have to report certain information to FinCEN about any “beneficial owners” and “company applicants”. Reporting companies existing prior to January 1, 2024, have until the end of 2024 to make their initial filing to FinCEN. However, reporting companies formed in 2024 have 90 days to make the initial report while companies founded after 2024 have only thirty days.

We recommend that every business prepare as follows:

(1)   Determine if the business is a reporting company and, if so, identify all beneficial owners. A beneficial owner is generally any individual who, directly or indirectly, either (a) exercises substantial control over a reporting company or (b) owns or controls at least 25% of the ownership interest in the reporting company.

(2)   Compile the required information about each beneficial owner, i.e., name, address, date of birth, acceptable form of identification (passport, driver’s license (or other document with photo).

(3)   Develop a system to track any change in beneficial owners or any information pertaining to a beneficial owner. Changes must be reported to FinCEN within 30 days after the change occurs.

(4)   For any business created in or after 2024, compile the required information about any company applicant, i.e., name, address, jurisdictional information, and taxpayer identification number for any individual who directly files (and if applicable, the person directing/controlling such filing) the document that creates or registers the reporting company. Businesses created before 2024 do not need to provide information about company applicants.

The concept of reporting beneficial information to FinCEN has met with great hostility in the business community throughout the Country. In fact, a U.S. District Court Judge in Alabama has recently ruled that the Act is unconstitutional. Unfortunately, this ruling does not apply to Maine or change the requirement to comply with the filing requirement for businesses in Maine. There may be Court proceedings in other jurisdictions, but until such time as a U.S. District Court in Maine (or the 1st Circuit Court of Appeals) rules it to be unconstitutional, or the Act is repealed, it will be necessary to comply with the Act.

The Maine Secretary of State in its notice on the deadline for filing Maine Annual Reports has referred to the new Federal Reporting Requirement that is explained above.

We are available to answer questions about the Corporate Transparency Act.