The Corporate Transparency Act (CTA) is a new federal legislation that enacted by Congress on January 1, 2021 and began January 1, 2024. Its primary stated aim is combating money laundering, illicit financing, and tax evasion that happens through the use of anonymous shell companies. CTA changes how companies report and has steep penalties for not reporting. It is at least worth getting a consultation.
Key provisions and requirements under the CTA include the establishment of a beneficial ownership registry, which will require companies to disclose information regarding their true owners. This registry will be maintained by the Financial Crimes Enforcement Network (FinCEN) and will be accessible to law enforcement agencies, financial institutions, and other stakeholders to enhance due diligence practices. See 31 U.S. Code, Section 5336.
The Act aims to close a significant loophole that has allowed criminals to use anonymous shell companies to hide illicit activities. Previously, these shell companies have been exploited as tools for money laundering, corruption, and fraud, making it challenging for law enforcement authorities to trace the true beneficiaries of these entities. The theory and hope is that mandating the disclosure of beneficial ownership information, the CTA will enhance transparency and facilitate the identification of illicit actors.
The current regulations in Arizona regarding corporate transparency are primarily governed by the Arizona Corporation Commission (ACC) and the Arizona Revised Statutes. The ACC is responsible for overseeing and regulating business entities in the state, including corporations, limited liability companies, and partnerships.
Under Arizona law, business entities are required to file certain documents with the ACC to ensure transparency. These include a Certificate of Disclosure, which provides information about the organizers and initial directors of the entity, as well as the company’s principal place of business and registered agent. Additionally, corporations are required to file annual reports with the ACC, providing updated information about the company’s directors, officers, and business operations.
In addition to these state-level regulations, businesses in Arizona may also be subject to reporting obligations under federal law. The recently enacted Corporate Transparency Act (CTA) imposes new reporting requirements on certain businesses to enhance corporate transparency and combat money laundering and terrorism financing. Under the CTA, certain entities, such as corporations, limited liability companies, and certain types of partnerships, will be required to report beneficial ownership information to the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of the Treasury. The purpose of this reporting is to identify the individuals who ultimately control or benefit from these business entities.
Beneficial Owners must report to FinCEN.
An individual that directly or indirectly exercises substantial control over the reporting company
or an individual who owns or controls 25% or more of the reporting company’s ownership
interests.
Who is a Beneficial Owner?
A Beneficial Owner is an individual that directly or indirectly exercises substantial control over the reporting company or an individual who owns or controls 25% or more of the reporting company’s ownership interests.
What needs to be reported by Beneficial Owners?
FinCEN report will require:
- Full name
- Date of birth
- Residential street address (beneficial owners) or business address (company
applicants) - Unique identifying number from a non-expired identification document, including
an image of the document (driver’s license, passport, state ID)
Are there reporting duties for individuals who simply file to create companies with the Arizona Corporate Commission?
Yes.
“COMPANY APPLICANT” must report.
This is any individual who files the document that forms a domestic entity or registers a foreign entity, and anyone who directs or controls the filing of the document by another person.
What must a company application report?
FinCEN report will require:
- Full name
- Date of birth
- Residential street address (beneficial owners) or business address (company
applicants) - Unique identifying number from a non-expired identification document, including
an image of the document (driver’s license, passport, state ID)
Reporting companies created after January 1st, 2024 must report, while those created prior to January 1, 2024, are not required to submit company applicant information. These companies only need to report that they were created/registered prior to the effective date and the information required for reporting companies and beneficial owners.
When must I file?
Reporting Companies created/registered before January 1, 2024, must file their initial report with FinCEN within 1 year of January 1, 2024.
Reporting Companies created/registered after January 1, 2024, must file the initial report with FinCEN within 90 days after they are created/registered for the first year of the requirement. After January 1, 2025, the report must be filed 30 days after the business is formed.
If there is a change in the information previously reported to FinCEN, Reporting Companies must file an updated report within 30 days. This requirement does not include updates on company applicants.
Where do I file?
The report is filed electronically with the Financial Crimes Enforcement Network (FinCEN), a division of the U.S. Department of Treasury, via a filing system available on FinCEN’s website. You can go to the FinCEN website: www.fincen.gov/boi or email FinCEN at FRC@fincen.gov. The filing process can be managed and submitted by a third-party professional services provider to simplify the process for your business.
The Arizona Corporation Commission will provide a link to the FinCEN website where you can file your report directly with FinCEN.
In summary, businesses in Arizona are subject to regulations aimed at promoting corporate transparency and accountability. These include the filing of various documents with the ACC and, in certain cases, reporting obligations under the newly enacted Corporate Transparency Act.
