The United States Congress has been engaged in a battle against fraud and money laundering ever since the Bank Secrecy Act was enacted in 1970. As part of this ongoing battle, Congress passed a new provision, the Corporate Transparency Act, as of January 1st, 2021. In this article you will learn how to prepare for the coming regulations.
Because of the CTA, companies are now required to compile reports, not only about the company itself, but also about the senior board, and beneficial ownership, and file it with the Financial Crimes Enforcement Network (FinCEN).
How to prepare
Because it can be tricky, organizing yourself, and knowing exactly what information to include, and not include we’ve compiled this quick guide to help you prepare. Although FinCEN has yet to finalize the filing details (expected for the end of 2022), we already have some basic information about how CTA filing will work.
Basically, your Corporate Transparency Act report (also sometimes called a beneficial ownership FinCEN report) will be composed of two main sections:
- Information about the business entity itself;
- Information about the beneficial owners of your company.
In short, the business owner will be mostly in direct charge of the first section of the report. For the second section, beneficial owners will need to file the reports on their own.
Step 1
Compile information about your company.
In the first section of the CTA, you just need to provide some basic details about your company, such as:
- Name of your company – also, if you’re working under a DBA (Doing Business As), you’ll need to file that, as well;
- Federal Employer Identification Number (FEIN) – also referred to as Federal Tax Identification Number, FEIN is a 9-digit unique number assigned to companies doing business in the U.S.;
- State of registration – where you filed your Articles of Incorporation/Organization, when you first started operating;
- Year the company was founded;
- Company registration number – different from the FEIN, this number is issued by your operating state, and can be found on their division of corporations website;
- Office address – the address officially on file for your company.
And that’s it, you’re done with section 1! On to preparing beneficial ownership FinCEN information!
Step 2
Identify your beneficial owners.
First things, first, understand who is a beneficial owner. As defined by the CTA itself, a “beneficial owner” is considered someone who owns 25% or more of the company or has “substantial control” over it. A beneficial owner is also someone who makes important decisions. So, it could be the direct owner of the company, but it could also mean a senior executive.
Step 3
Distribute CTA forms to them.
Gather the relevant information that’ll be required of your beneficial owners during filing. For the Corporate Transparency Act, beneficial owners will need to provide:
- Name;
- Date of birth;
- Citizenship/Nationality;
- Role in Company;
- Residential Address;
- Identifying Document.
Step 4
Gather ID pictures of your beneficial owners.
As part of your company’s CTA report, you’ll also need to include ID-type images of all of your beneficial owners.
Step 5
Submit to FinCEN!
Lastly, submit your completed report to FinCEN, to show compliance with the Corporate Transparency Act.
