The Corporate Transparency Act Redux

Mark Rubin

I wrote about the Corporate Transparency Act (CTA) 11 months ago. I alluded to fear, as penalties for non-compliance top out at $10,000. Today – and I had planned to be in touch earlier, but the year ran away from me, like that dish and spoon – I am equanimous about the whole thing. Not without concerns, but calm.

The Drill

Do you have inactive entities? LLCs and corporations that do nothing and own nothing? Dissolve them by December 31, 2024, and the CTA matters not at all.

Do you have existing active entities? By active, I refer to any legal entity that registers with the state. Corporations. Limited liability companies and professional LLCs. Limited partnerships and limited liability partnerships. (Sole proprietorships? No. Simple partnerships? No.) You will need to report by December 31, 2024, more than a year from now. You can’t report yet, but everyone assumes online reporting will be available on or soon after January 1, 2024.

Do you need to create a new entity? (Are you in my queue, wondering why I am blogging, rather than forming your new entity?) Get it done by December 31, 2023, so that you have a full year to report.

If you create an entity on or after January 1, 2024, you will need to report withing 30 days of the formation date. Reporting appears to apply to anyone who owns a 25% interest in an entity. Online reporting should provide guidance and prompts. Stay tuned.

Dissolving Entities

I am available for the next two weeks to dissolve Arizona entities. The process involves a bit of paperwork and online filing. Do-it-yourselfers can get it done, but online filing requires an online account, or paper filing at the Arizona Corporation Commission. I am charging no more than $250 per entity to dissolve an entity, plus filing fees. Discounts for volume filings and for current clients. (The window will start closing after Christmas, as time shrinks.)

Decluttering

Again, you should not fret about the CTA. At a minimum you have more than a year to deal with it as of today. “No fretting” aside, the 12/31/2023 deadline provides an opportunity to avoids its consequences as they relate to inactive entities.

One more thing? I started practicing law more than 42 years ago. LLCs did not exist, and the Arizona Corporations Commission required annual reports from corporations. LLCs? The entity form came into existence in the early 1990s, if I recall correctly. Easy to form. No annual reports or other administrative requirements.

The continued, no maintenance existence of LLCs creates a wasteland of entities that clutter search engines and create potential liabilities – CTA non-reporting penalties, for example – for owners. Frankly, the CTA offers an opportunity to do some decluttering. Getting rid of detritus helps your successors when you pass and reduces risk. (I heard about an LLC that owns a property which is in escrow, but both LLC members have passed. No opportunities for probate avoidance, and no one can identify any relatives. An unnecessary mess!)

Be well. Merry holidays!