Congress Passes Corporate Transparency Act

March 2nd, 2021 at 8:10 PM

If you’ve formed a limited liability company (LLC) or corporation to operate your business or are thinking about doing so, you need to know about the Corporate Transparency Act.

Enacted in January 2021, Congress’s new law will end business owners’ ability to form business entities without revealing their identities to the government.

The new law intends to prevent the formation of anonymous shell companies for illegal purposes such as money laundering and tax evasion. But the transparency rules apply to all small LLCs and corporations, including your legitimate business.

For the first time, LLCs and corporations will have to file with the federal government when formed. Existing entities also have to comply with the law.

When forming an LLC or a corporation, the new law requires you to provide the names, addresses, and other information for the entity’s real “beneficial” owners. You provide the information to the Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN)—the Treasury Department’s financial intelligence unit.

Individuals and businesses form two million new LLCs and corporations each year, so there will be much new paperwork.

At least five million existing LLCs and corporations will have to provide the same information and keep it updated.

The program begins in January 2022. Existing LLCs and corporations have until January 2024 to comply.

Not all LLCs and corporations are subject to the new law—larger businesses are exempt.

FinCEN will not make the ownership information available to the public. But the information will be available to federal, state, and local law enforcement agencies, including the IRS.

Mark S. Fineberg, CPA