"Corporate Transparency Act: What Companies Need to Know and How to Comply"

Effective January 1, 2024, the Corporate Transparency Act and its corresponding regulations (the “CTA”) requires certain entities created or registered to do business in the United States to disclose certain company information to the Financial Crimes Enforcement Network, a bureau of the United States Department of Treasury. This information, referred to as Beneficial Ownership Information, must be filed online at the Financial Crimes Enforcement Network website.

Companies that are required to report are referred to as “Reporting Companies.” Generally, all companies are Reporting Companies unless they fit into one of the 23 exemptions provided by the CTA. The report requires certain information about the Reporting Company and its Beneficial Owners, as defined by the CTA.

For Reporting Companies formed prior to January 1, 2024, the report must be filed before January 1, 2025. For Reporting Companies formed in 2024, the report must be filed within 90 days of the Reporting Company receiving notice of its formation. Reporting Companies formed after 2024 will have 30 days from the Reporting Company receiving notice of its formation to file the report.

The report is only required to be filed one time. However, if there is any change to the required information, an updated report must be filed within 30 days of such change. These changes include, but are not limited to, the name of the company (including a new trade name), a change in Beneficial Owners, a change to a Beneficial Owner’s name, address, or unique identifying number (including a change to their driver’s license or other identifying document, in which case the Reporting Company will need to upload a new image of the identifying document).

A person who willfully violates the reporting requirements may be subject to civil penalties of up to $500 per day for each day the violation continues. They also may be subject to criminal penalties of up to two years in prison and a fine of up to $10,000.

If you need assistance determining whether your entity is a Reporting Company, who its Beneficial Owners are, or filing the report, the attorneys at Erickson Sederstrom can assist you in complying with these new federal requirements.

Personal Assets are Not Protected If Corporate Formalities Are Not Followed

A recent Nebraska Supreme Court case illustrates the need for your business to comply with basic corporate formalities to protect yourself from personal liability.  In Thomas Grady Photography v. Amazing Vapor, the Nebraska Supreme Court held that a business owner must disclose his or her capacity as an agent of a corporation to escape personal liability for contracts made. 301 Neb. 401 (2018). Grady Photography filed suit against Amazing Vapor, MCJC Companies, Manuel Calderon, and Thomas Anderson for breach of contract for failing to pay on two contracts for photography services.  The court ultimately held that Anderson was individually liable for breach of both oral contracts because Anderson did not inform Grady of the corporate status of Amazing Vapor throughout the entirety of their business relationship. 

Erickson | Sederstrom’s attorneys have significant experience working with entities of all sizes to ensure that their corporate structure protects them from personal liability.  If you have any questions about whether your entity is in fact protecting you from personal liability or if you need assistance in forming a corporation, limited liability company or other entity to protect your personal assets, attorneys Paul Heimann, Bill Foley, Andrew Collins and Michelle Elkin would be happy help.