Own a Trust that is a partial or full owner of a business? The new Corporate Transparency Act may mandate the disclosure of specific information about your Trust in an annual report. To determine if the new rule applies to you, continue reading.
Prepare for a notable development in legal and business news – the impending Corporate Transparency Act, scheduled to take effect next year. Starting January 1, 2024, every small business must submit an annual report divulging the names of their major owners. If your Trust holds partial or full ownership in a business, that business may be obligated to reveal details about your trust in its annual corporate report to the government, including information about the Trustee or beneficiaries.
Curious about whether your Trust needs to be reported? Fear not, as answers are at hand. Keep reading to uncover the essential details!
What is the Purpose of the Corporate Transparency Act and What Does It Require?
Meet the Corporate Transparency Act, enacted in 2020 and set to be enforced from January 1, 2024. This Act targets money laundering and terrorism financing schemes involving “shell” corporations—entities existing only on paper and not engaged in actual business or trade. Small companies are now required to disclose names of owners with 25% or more ownership and individuals exerting significant control. The aim is to identify and expose shell corporations, often implicated in money laundering activities within small businesses.
To comply, businesses must submit an annual report to the Financial Crimes Enforcement Network (FinCEN) containing details such as business name, address, state of formation, Entity Identification Number (EIN), owner/controller’s name, birth date, address, and a
government-issued photo ID copy for each owner or controller. Failure to file may result in fines or imprisonment.
Does My Trust Need to Be Disclosed?
Given a Trust’s potential ownership of a business, it’s subject to the Corporate Transparency Act under limited circumstances. To determine disclosure necessity:
The rule applies to companies created through filing a formation document with the Secretary of State or similar office.
Exemptions include non-profits, publicly traded companies, regulated entities, and large companies meeting specific criteria.
Inactive LLCs or corporations are exempt, sparing Trusts from reporting. However, if your Trust owns a share of a small, for-profit company, disclosure is required.
Contact us for a Trust review to ensure accurate reporting of the beneficial owner.
Does the Corporate Transparency Act Affect My Trust’s Asset Protection?
Owning a Trust that holds business interests doesn’t compromise asset protection. Despite reduced privacy benefits under the new rule, Trust details remain private, used by the government solely for investigating financial crimes. Trusts continue to offer excellent privacy, probate avoidance, and enduring asset protection.
Guidance for Your Family Now and For Years to Come
Whether you have a Trust or are contemplating an estate plan, understanding the law’s impact is crucial. As your Personal Family Lawyer®, I maintain a lifelong relationship with clients, keeping them informed about legal changes and reviewing their plans periodically. To create a tailored plan or address concerns about the Corporate Transparency Act, schedule a free call today. I look forward to serving you now and in the years to come. Contact me, your Personal Family Lawyer®, at (916) 801-8995 or jodie@yourpropertylawfirm.com
