New reporting obligations for US-based companies

There is an imminent change coming regarding reporting requirements of companies in the U.S. through what is being called the Corporate Transparency Act ("CTA"). This Act will require companies to disclose certain information about their beneficial owners to make ownership more transparent in an effort to reduce money laundering through shell companies. The method of reporting still has not been communicated so we are waiting for that further direction. 

Who does this apply to?

Please, bear with me. This requirement applies to all companies, incorporated in the USA unless they are exempt.

The exempt companies are:

• most of the regulated businesses, such as banks, insurance companies, broker-dealers, investment companies and advisors, accounting firms,
• tax-exempt entities,
• large operating companies, namely those companies, which:
  • employ more than 20 full-time employees in the United States;
  • have an operating presence at a physical office within the United States; and
  • had more than $5,000,000 in gross sales in the previous year.
• subsidiaries of certain exempt entities,
• inactive entities, namely those companies, which:
  • were in existence on or before January 1, 2020;
  • are not engaged in active business;
  • are not owned by a foreign person, whether directly or indirectly, wholly or partially;
  • have not experienced any change in ownership in the preceding 12-month period;
  • have not sent or received any funds in an amount greater than $1,000, either directly or through any financial account in which the entity or any affiliate of the entity had an interest, in the preceding 12-month period; and
  • do not otherwise hold any kind or type of assets, whether in the United States or abroad, including any ownership interest in any corporation, limited liability company or other similar entity.

What do you need to do?

It is our expectation that most of our small business clients will be subject to the CTA reporting requirements. If you are not an exempt entity, and your entity is already in existence you have until January 1, 2025, to report. For any entities created on or after January 1, 2024, beneficial owner information must be reported within 30 days of filing the Articles or Certificate of Formation for the entity. 

The filing includes information on the beneficial owners of your company. Beneficial owners include any individual who, directly or indirectly, exercised substantial control over the Reporting Company or owns or controls at least twenty-five per cent (25%) of the ownership interest of the reporting company.

An individual exercises substantial control over a Reporting Company if the individual:

• serves as a senior officer;
• has authority over the appointment or removal of any senior officer or a majority of the governing body of the Reporting Company; or
• directs, determines or has substantial influence over important decisions made by the Reporting Company; or
• has any form of substantial control over the Reporting Company. Additionally, contractual rights entitling an individual to the profits of a Reporting Company or rights arising through a trust agreement (as either a trustee or as a beneficiary) may cause an individual to be deemed a beneficial owner of a Reporting Company.

What is the easiest way to deal with this?

For existing entities, there is plenty of time to get this done, but we recommend you get it done sooner rather than later. At the end of 2024, everyone will be late and busy getting this done. For newly incorporated entities after 1st January 2024, you will have 30 days.

Get in touch with us for assistance in determining the beneficial ownership of your company. We offer a package service, which includes:

• analysis of your company and determining whether you are required to report,
• analysis of the beneficial ownership,
• assistance with preparing the filing documentation.

The price for the service, including one conference call, is fixed at 500.00 EUR. You can kick off by getting in touch with us.