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“Corporate Transparency Act” Mandates Business Owners Share Personal Information

February 22, 2021 | by Trevor Torcello
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On January 1, 2021, Congress passed the National Defense Authorization Act (NDAA). The act is centered on authorizing appropriations for military spending, but within the bill was another act that will have larger ramifications for small business owners.
 
The Corporate Transparency Act (CTA) was tied to the NDAA because its intent is to make it more difficult for foreign players to set up corporations in the United States and operate illicit activities in secret. Countless small business owners may soon find themselves having to share their personal information –information previously shielded by the formation of an entity such as an LLC.
 
Who must share their information?
The information must be reported for any individual(s) applying to the state to form a Reporting Company, which includes corporations, LLCs, LLPs, and any similar formations. Under the CTA, with a few notable exceptions, existing entities and all entities formed in the future will have to report personal information for anyone deemed a “beneficial owner” in the business. This data will be supplied to FinCEN, a bureau of the United States Treasury. The Treasury Department oversees the information as part of its efforts to curb money-laundering operations.
 
How will my information be used?
According to FinCEN, the collected information cannot be made available to the public under any circumstances. Under terms of the CTA, an individual’s information may only be released to:

  • A federal, state, local, or tribal law enforcement agency conducting an active investigation
  • A federal agency making the request on behalf of a foreign law enforcement agency
  • A financial institution conducting due diligence under the Banking Secrecy Act or USA PATRIOT Act – with customer consent

What companies and organizations are exempt from this reporting?

  • Companies that employ more than 20 people, report revenues of more than $5 million annually, and have a physical presence in the United States
  • Non-profit organizations
  • Most financial institutions such as investment and accounting firms, banks, credit unions, and trading firms

What information must be shared?

  • The individual’s full legal name
  • Date of birth
  • Residential or business address
  • What is being called a “unique identifying number” to include any government issued identification number

 
What if I don’t comply?
As with many federal regulations, the CTA comes with steep civil and criminal penalties for individuals who do not provides the require information.
 
When does the CTA take effect?
The good news is, the filing requirements have not taken effect yet. The U.S. Treasury has until early 2022 to roll out the new regulations. Until then, it is business as usual. Our Business and Corporate Law team will stay on top of the implementation of the CTA, and we will issue a client alert once more information is available.
 
Click here to review the full text of H.R. 6395, the National Defense Authorization Act, which includes the Corporate Transparency Act.
 
Trevor M. Torcello is a shareholder of Gross Shuman P.C. who focuses his practice in the areas of commercial real estate, business transactions, agribusiness and working with emerging businesses. He has extensive experience representing various parties in complex business transactions. He can be reached at 716.854.4300 ext. 227 or ttorcello@gross-shuman.com.