With the new year comes new legislation that affects all businesses that report to the IRS. This changes what businesses have to report. The Corporate Transparency Act is one of the most significant of these recent changes.
If you are a business owner in Texas, here’s what you need to know.
What is the Corporate Transparency Act?
The Corporate Transparency Act came into effect on January 1, 2024.
The Act requires certain businesses to file a beneficial ownership information report with the Department of Treasury’s Financial Crimes Enforcement Network, an agency better known as FinCEN.
A “beneficial owner,” means any individual who owns or controls at least 25 percent of the company.
But not every company has to report.
Who Reports Under the Act?
A reporting company can be either foreign or domestic.
A domestic company under the Act includes a corporation or limited liability company (LLC) that is created in the United States
This would include Texas LLCs and corporations formed under Texas law.
Foreign companies, or ones formed outside of the US, still have to report, assuming they conduct business in the United States.
In many cases, a company will need to file under the new Act.
But what needs to be reported?
What Needs to Be Reported Under the Corporate Transparency Act?
A Beneficial Ownership Report must include the following:
- The Full Legal name of the Reporting Company;
- Any trade name;
- The main address of business;
- The Internal Revenue Service (IRS) Taxpayer Identification Number (TIN) (including an Employer Identification Number (EIN)) of the reporting company; and
- Each beneficial owner of the company.
That’s not all, however. For each owner, the report must include:
- His or her legal name, date of birth, and current mailing address and:
- Either a unique identifying number from an acceptable identification document (proven by a picture of the number), or a FinCEN identifier.
Those are the general requirements for reporting companies, but there are exceptions.
Who Exempt From Reporting Under the Corporate Transparency Act?
There are a total of 23 different types of companies that don’t have to report under the new Transparency Act.
Most of these are financial institutions like banks and investment firms, but include nonprofit organizations as well.
It’s worth discussing with an attorney to confirm whether you have to file anything under the Corporate Transparency Act or not.
Conclusion
The Corporate Transparency Act is very new in its application and can be difficult to understand at first.
The Act, like all laws, is also subject to change. New requirements might be added or removed in time.
That’s why it’s important to contact an attorney familiar with business law to make sure your business is compliant with the Act.