Happy Labor Day and Legal Update for Our Valued Clients:
Mandatory Reporting Requirements for
Limited Liability Companies and Corporations
The attorneys and staff at Udall Shumway PLC wish you a happy and safe Labor Day Holiday. Udall Shumway celebrates the American work ethic in all its forms, keeping our nation and local communities prosperous and growing. In Arizona, that is literally true, with the hard work of laborers, business owners, farmers, engineers, designers, and caregivers of all kinds – the list is as broad as our vibrant economy — making Maricopa County one of the fastest-growing areas in the nation.
In 2021 especially, we celebrate the dedication of healthcare workers, teachers, first responders, and customer-facing businesses and their employees, some of the true heroes of our recent times.
As both small and large businesses keep their eyes fixed on the great horizons of Arizona, staying informed about a recent change in the federal law of limited liability companies and corporations will help you keep your feet firmly planted on the safe ground of statutory compliance. We hope you are able to use the following information to your advantage, and please feel free to share it with your fellow business community members.
New Mandatory Reporting Requirements for Limited Liability Companies and Corporations
Udall Shumway represents Limited Liability Companies and Corporations in their formation, as statutory agents, and in tax, business, and litigation matters. We want to let our clients and other businesses know about new federal reporting requirements that take effect on January 1, 2022.
In 2020, Congress passed, and President Trump signed the “Corporate Transparency Act” (the “CTA”). The purpose of the Act is to prevent money laundering and other illegal activity by small companies. Usually, the federal government excludes small businesses from laws because of the burden on them. The CTA does the opposite, as it applies to businesses with fewer than 20 employees or less than $5 million in annual revenue.
The CTA is aimed at preventing small companies from hiding their ownership. It requires companies to complete forms that disclose the members or shareholders of companies that own 25% or more of the membership interests in an LLC or shares of a corporation. Companies are also required to update their reporting if ownership changes. The reporting will include legal names, dates of birth, addresses and identification numbers like Social Security numbers.
The information will be available to federal, state, and local law enforcement agencies. The Financial Crimes Enforcement Network (“FinCEN”), a unit of the Treasury Department will maintain the database. The public will not have access to the information, but banks and other financial institutions can access the information if they have the companies’ consent.
Failure to report can result in civil penalties of up to $10,000.00.
Although the CTA is effective as of January 1, 2022, the reporting requirements will only become mandatory two years after FinCEN publishes its regulations and makes the forms available.
If you believe you may be subject to the CTA and would like our assistance in determining its applicability to you, please contact Udall Shumway’s business and transaction attorneys.
Once again, we at Udall Shumway wish you a happy and safe Labor Day Holiday. As always, we stand by you as a ready legal resource.