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Making a List and Checking it Twice: Are you Ready for Corporate Transparency Act compliance?

by | Dec 12, 2023 | Business Law

The first step in Christmas shopping? Make a list of whom to shop for.

You should approach the Corporate Transparency Act in the same way.

Beginning in a few short weeks, the CTA will require beneficial owner reports to be filed within 90 days of forming a new LLC or corporation. The more significant deadline is January 1, 2025, when all entities formed before January 1, 2024, must file that report or find an exemption.

The purpose of this blog post is to get our arms around the question: How can we most efficiently capture “all entities”? After all, we are talking about decades of business activity that must be accounted for.

We now return to the concept of “a list”—or a way to organize this task.

First, make a very general list, such as “investment real estate,” “active businesses,” and “aborted ventures.” Second, from each general list, create sublists, perhaps by industry (i.e., all corporations in the stamping business), by geography (i.e., all limited partnerships based in Silicon Valley), or by business partner (i.e., all LLCs with Warren Buffett). Third, if necessary, break this down into sub-sub lists by time period or otherwise.

Hopefully, this listing process will lead you to remember all the entities for which you are responsible. But it probably won’t get you to 100%. Here are some remaining steps to clear out the short strokes:

  • Review your tax return and the K-1s and 1099-DIVs you receive
  • Search your name on the Secretary of State’s offices’ websites
  • Call your lawyer and accountant. Schedule an hour to discuss your list and brainstorm what you’re missing.
  • Cross-reference your list with your most common business partners’ lists (or call them to talk through yours)

Once you feel comfortable, you’ve corralled “all entities,” begin to sort them by action you need to take under CTA:

  1. File a beneficial owner report by Jan. 1, 2025.
  2. Dissolve or merge before January 1, 2025.
  3. Ignore them for now, as they are exempt (with the most common exemptions being operating companies and dormant entities).

All of this is a huge hassle, no doubt. But we are urging clients to take it seriously. FinCEN has the tools to determine who has been naughty or nice.

If you have questions about the Corporate Transparency Act, contact Mike Rasor at 216-621-7860.

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