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How the Corporate Transparency Act May Impact Your Estate Plan

Feb 20, 2024 | Estate Planning

Navigating the Impact of the Corporate Transparency Act on Your Business or Estate Plan

Commencing January 1, 2024, a pivotal legal development, known as the Corporate Transparency Act (CTA), introduces a reporting requirement for certain business entities’ owners. This mandate involves filing comprehensive reports with the federal government, disclosing crucial information about entity ownership. Enacted to combat illicit activities such as money laundering, terrorism financing, and tax fraud, the CTA holds significance for those who have incorporated entities, like corporations, limited liability companies (LLCs), or family limited partnerships, within their estate plans.

Understanding the Corporate Transparency Act:

The CTA designates reporting companies, including corporations, LLCs, or similar entities, necessitating the submission of specific details to the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN). Reporting encompasses vital information about the company and its beneficial owners, with additional details required for entities created on or after January 1, 2024.

Reported details include:

  • Company’s legal and trade names
  • Principal place of business address
  • Jurisdiction of Formation
  • Tax identification number
  • Beneficial owners’ information:

Full legal name

Date of birth

Current address

Unique identification number from an acceptable document

For entities formed post-January 1, 2024, similar details about the company’s applicant must also be furnished.

Note: While trusts are generally not considered reporting companies, their ownership interest in a reporting entity may trigger disclosure obligations under the CTA.

Assessing the Impact:

The CTA, unlike many business regulations that focus on larger entities, targets smaller businesses. Exemptions exist, primarily for heavily regulated industries with their reporting requirements or businesses exceeding certain criteria.

Ensuring Compliance:

Given the potential impact of the CTA, compliance is paramount for those with business entities in their estate plans. Whether it’s LLCs or family limited partnerships, entities created for asset protection or probate avoidance, understanding the implications and meeting reporting requirements is essential.

Limited Liability Companies (LLCs):

LLCs provide asset protection by separating business debts from personal assets, offering probate avoidance benefits by holding accounts and property within the entity and allowing for strategic gifting.

Family Limited Partnerships (FLPs):

FLPs, designed for family collaboration, offer asset protection and tax planning benefits, shielding assets from individual creditors and allowing for strategic gifting.

Complying with the CTA:

To adhere to the CTA, gather necessary information for reporting companies and beneficial owners and submit initial reports by January 1, 2025, for entities existing before January 1, 2024, and within specific timelines for entities created after that date.

Ensuring Compliance with Expert Guidance:

Considering the intricate intersection of entities and the CTA, seeking professional advice becomes imperative. Whether you currently possess such entities or contemplate their formation, connect with us to discuss the optimal steps for full CTA compliance. Schedule an appointment to navigate this regulatory landscape effectively. Please call our office at (435) 688-9231 if you require our services.

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