South Dakota Corporate Transparency Act Attorneys

In an effort to combat financial crimes and improve corporate transparency, the United States government introduced the Corporate Transparency Act (CTA) in January 2024. This legislation marks a significant shift in how businesses report and operate, emphasizing the need for transparency and compliance. Understanding the intricacies of the CTA and ensuring compliance can be daunting for business owners.

At Aspen Legacy Planning, our South Dakota business law attorneys are experienced in both business and corporate law, which enables us to provide our clients with comprehensive and integral legal services in those practice areas. We are here to help your business mitigate any risks associated with the Corporate Transparency Act and avoid any legal issues you could face because of the CTA.

To learn more about Aspen Legacy Planning, read our clients’ testimonials.

For more information about the Corporate Transparency Act and how we can help your business properly adhere to it, call (605) 610-4016 or contact us onlinetoday to schedule a no-obligation consultation with our business attorneys in Rapid City.

What Is the Corporate Transparency Act?

The CTA was enacted with the primary goal of uncovering the individuals ("beneficial owners") who own, control, and profit from companies registered in the United States. The act aims to deter and detect illegal activities, including money laundering, terrorism financing, and fraud, by making corporate ownership more transparent, this legislation mandates increased transparency regarding corporate ownership structures. Failure to comply with these requirements could result in severe civil and criminal penalties.

Key Provisions and Requirements under the CTA

Under the CTA, certain businesses are required to file a report with the Financial Crimes Enforcement Network (FinCEN) detailing their beneficial ownership information. This includes:

• Identifying Information: Names, birthdates, addresses, and a unique identifying number from an acceptable document (e.g., passport or driver’s license) of the beneficial owners.
• Reporting Company Details: Information regarding the reporting company itself, such as the company name, address, and purpose.

Not all businesses are subject to these requirements. The act provides exemptions for several categories of entities, including certain regulated companies and enterprises that meet specific criteria.

A Reporting Company is required to report either: (1) each Beneficial Owner’s name, date of birth, address, a unique identifying number (like a passport or driver’s license number), and a photo image of the document associated with the identifying number; or (2) each Beneficial Owner’s FinCEN Identifier (i.e., a unique identifying number that a Beneficial Owner may request from FinCEN). under a state statute that requires a filing with the state (e.g., a Delaware Statutory Trust). However, a trust is considered a Beneficial Owner of a Reporting Company when it owns 25 percent or more of the entity or has substantial control over it. In that case, providing the name of the trust is not sufficient to meet the CTA’s reporting requirements. Rather, the CTA “looks through” the trust to identify key parties to the trust, whose information must be reported by the Reporting Company. This includes:

1. A trustee, trust protector, directing party or other individual with authority to dispose of trust assets. For example, this includes a trustee with the power to sell an interest in the Reporting Company, transfer the interest to a beneficiary, or even abandon the interest.
2. A beneficiary who is the sole permissible recipient of trust income and principal. Importantly, this does not include multiple beneficiaries of a “pooled” trust, or contingent beneficiaries who do not have any current beneficial right to income or principal.
3. Any individual with the power to withdraw or direct the current disposition of substantially all of the trust assets. For example, this includes a beneficiary with a withdrawal right over all of the trust’s assets, a grantor of a revocable trust who has the right to revoke the trust, or a grantor of an irrevocable trust with a substitution power.
4. Any individual with the power to exercise substantial control over the Reporting Company (e.g., the power to vote stock or authority regarding important decisions such as reorganization, major expenditures, compensation of senior officers, or amending governing documents).
5. Any individual whose ownership interests meet the 25 percent threshold by aggregating the individual’s ownership interests in trust with any interests that the individual owns or controls directly or indirectly outside of the trust. For example, if an individual (a) owns 10 percent of the Reporting Company individually; and (b) is the sole income and principal beneficiary of a trust that owns 15 percent of a Reporting Company, then these percentages are aggregated to total 25 percent, which qualifies the individual as a Beneficial Owner whose information must be reported.

Owners outside of the trust that meet the ownership or control requirements. Therefore, when a trust is involved in the ownership or control of a Reporting Company, determining the business’s Beneficial Owners will not only require review of its governing documents and ownership structure, but also the terms of the trust agreement and related trust documents.