Effective January 1, 2024, most legal entities incorporated, organized, or registered to do business (i.e., LLCs, LLP, PLLC, Inc., Co., etc.) in a state must disclose information relating to its owners, officers, and controlling persons with the Financial Crimes Enforcement Network, a bureau of the U.S. Department of the Treasury, pursuant to the Corporate Transparency Act (“CTA”).

Affected entities must report information including: (1) the reporting company; (2) the reporting company’s beneficial owners; and (3) “company applicants” who made the filings to create the entity. While the reporting obligations are effective January 1, 2024, the actual due date for the initial report will depend on when the entity was created:

• If the company is created on or after January 1, 2024, the initial report is due within 30 calendar days of the date the entity is created.
• If the company is or was formed before January 1, 2024, the initial report is due no later than January 1, 2025.

In other words, effective January 1, 2024, new entities will have to file a report within 30 days of their creation. Entities already in existence on January 1, 2024 have until January 1, 2025 to file a report. Reports will not be accepted prior to January 1, 2024; however, entities should begin collecting information for the reports as soon as possible.

The CTA does contain exceptions for 23 categories of larger, more highly regulated industries and other entities that may be subject to different ownership reporting requirements. One category of entities exempt from the CTA are “Large Operating Companies.” Any entity that has all of the following attributes qualifies as a Large Operating Company:

1. More than 20 full-time employees in the United States. A full-time employee is generally anyone employed an average of at least 30 hours per week or 130 hours per month, with adaptations for non-hourly employees. The exempt entity must be the employer; it may not consolidate employees across affiliated entities.
2. An operating presence at a physical office within the United States. This physical office may be owned or leased and may not be shared other than with the reporting company's affiliates.
3. Reported more than $5 million in gross receipts or sales (net of returns and allowances) on its filed prior year federal tax return, excluding gross receipts or sales from sources outside the United States, as determined under federal income tax principles. An entity that is part of an affiliated group of corporations (within the meaning of 26 U.S.C. § 1504) that filed a consolidated return must use the amount reported on the consolidated return for the group.

For banking institutions: “Any bank, as defined in: (A) Sec. 3 of the Federal Deposit Insurance Act, (B) Sec. 2(a) of the Investment Company Act of 1940, or (C) Sec. 202(a) of the Investment Advisers Act of 1940 is exempt from the CTA."

Businesses should begin assessing their obligations under the CTA now, including whether they may be exempt. As the CTA contains prohibitions on double-counting employees across affiliates and other restrictions concerning affiliates, it is advisable to seek legal counsel to assess the applicability – and extent – of the exemption. Please contact Spilman Thomas & Battle, PLLC for more information and to discuss your reporting obligations or exemptions under the CTA.