Are You Required to File Under the CTA?

 

Major new legislation called the Corporate Transparency Act (CTA) is going into effect in 2024. This law requires most domestic companies in the United States to report their beneficial ownership information to the government. However, not all entities will need to comply.

The companies that are immediately affected by this legislation are called “reporting companies.” What is a reporting company under the CTA? Essentially, any domestic corporation, LLC, partnership, or other entity that files registration documents with a Secretary of State or similar office. This includes entities formed under tribal organizations.

Some examples of reporting companies that will need to comply with the CTA:

• Delaware LLCs
• California for-profit corporations
• Florida Homeowners Associations
• Texas General Partnerships

*Foreign report companies likely do not need to report under the CTA.

What about exemptions to the CTA reporting rules? There are 23 different exemptions under this new legislation. Most notably, highly regulated environments such as large investment companies and tax-exempt entities are exempt from the CTA reporting requirements.

• The key exemptions that agencies should focus on are as follows:
• Have more than 20 full-time employees
• Maintain a physical presence in the US
• Generate over $5 million in annual gross receipts

Essentially, the CTA is targeting smaller companies with under 20 employees and under $5 million in gross receipts to report beneficial ownership.

Environments that are already highly-regulated aren’t required to file under this new law.

The bottom line is that most small and medium enterprises, including agencies formed in the US will need to comply with the CTA starting in 2024. We’lI go into more detail about the rules and regulations on the most recent episode of the Progressive Agency Podcast.

And to learn more about beneficial ownership and the penalties incurred for not filing, there are more details in our blog here.