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Understanding the Corporate Transparency Act
Understanding the Corporate Transparency Act
Feb 15, 2024
Halle Kaplan-Allan, Tuan Tiet, Shauna France
What is the CTA?
The Corporate Transparency Act (CTA), which was originally passed in 2021 as part of the National Defense Authorization Act, went into effect on January 1, 2024. The goal of the CTA is to combat illegal activities (e.g., tax fraud, money laundering, etc.) by creating more transparency around company ownership. The CTA requires certain U.S. businesses, including limited liability companies and other similar entities, to report identifying information about their beneficial owners to the Department of Treasury’s Financial Crimes Enforcement Network (FinCEN). By requiring the disclosure of beneficial ownership information (BOI), the act intends to peel back the layers of anonymity that have allowed such activities to flourish.
A beneficial owner refers to the person(s) who ultimately own, control, or have significant influence over a company, typically through substantial equity interests or decision-making authority. The CTA mandates that covered entities disclose information about their beneficial owners, including names, birthdates, addresses, and identification numbers (such as a driver’s license or passport number).
What does this mean for VCs?
Unless an entity is exempt, under the CTA, all private companies such as LLCs, corporations, partnerships, and similar entities that do business in the US are mandated to submit BOI for certain beneficial owners. This includes LLCs formed for the purpose of making an investment, such as Sydecar SPVs and funds.
Entities must disclose the name, birthdate, and address, and provide an ID (e.g., a passport or driver’s license) for all beneficial owners. For the purposes of CTA, a beneficial owner is anyone who owns at least 25% of the fund. The fund/SPV manager is also considered a beneficial owner because they possess “significant influence and control” over the entity.
For entities established after December 31, 2023, the initial CTA filings must be submitted within 90 days of their formation date. Entities formed before January 1, 2024, have until January 1, 2025, to submit their initial filings. Starting on January 1, 2025, any new entities created have to submit their filings within 30 days of formation.
How is Sydecar ensuring compliance with CTA requirements?
As always, our goal at Sydecar is to give you peace of mind with your investments so that you can focus on what matters most: finding great deals and building relationships. In response to the CTA reporting requirements, we have built a workflow to collect the required information from all new SPV and Fund+ investors and submit initial and amendment BOI forms to FinCEN on behalf of our customers. We will be collecting identifying information from all investors (not those considered beneficial owners at the time of their subscription), in order to frontload the process. By doing so, we aim to ensure that you remain compliant with the CTA without creating unnecessary friction during the investing process.
Data collection required by CTA will also be integrated into our KYC/EDD process. This means that Sydecar customers likely will not have to take any additional actions outside of the platform to ensure they are in compliance with CTA reporting requirements*.
Request a demo here to learn more about how we help you maintain compliance while streamlining your investment operations.
CTA FAQs
1. What is the Corporate Transparency Act (CTA)?
The CTA, effective January 1, 2024, requires certain U.S. businesses (including corporations, LLCs, and similar entities) to report their beneficial owners to FinCEN to increase corporate ownership transparency and combat illicit financial activities.
2. Who needs to report under the CTA?
U.S.-created or registered corporations, LLCs, or similar entities must report beneficial ownership information to FinCEN. Certain entities, such as publicly traded companies, nonprofits, and certain large operating companies, are exempt from these reporting requirements.
3. When does BOI have to be reported?
Entities formed prior to January 1, 2024, have until January 1, 2025, to report. New entities created in 2024 have 90 days from either the actual notice of formation or public announcement (whichever comes first), and those established from 2025 onwards will have 30 days from notification or public announcement of their formation.
4. What information must be reported to FinCEN?
Entities must report identifying information of their beneficial owners, including names, birthdates, addresses, and ID numbers.
5. What constitutes a beneficial owner under the CTA?
A beneficial owner is someone who ultimately owns, controls, or significantly influences a company, usually through substantial equity interests or decision-making authority. The threshold for beneficial ownership may vary between jurisdictions but for SPVs formed in the state of Delaware (such as Sydecar SPVs), an ultimate beneficial owner is anyone who owns at least 25% of the SPV.
6. How does the CTA affect venture capital investors and fund managers?
VCs, including those managing LLCs, SPVs, or funds, must report BOI by the specified deadlines described above, unless an exemption applies.
7. How is Sydecar facilitating compliance with the CTA for its users?
Sydecar has developed a workflow to collect the required information from beneficial owners of an SPV and submit BOI forms to FinCEN on behalf of its customers, ensuring compliance. The data collection will be integrated into our KYC/EDD process, limiting any unnecessary friction for our customers.
8. Do I need to take any additional actions on Sydecar to comply with CTA?
Sydecar will give all customers the ability to opt-in to our CTA services. For those who opt-in, Sydecar will handle all BOI collection and submit initial and amendment filings to FinCEN on behalf of our customers, meaning that no additional steps outside the platform should be required for compliance. For questions regarding requirements specific to you or any other entities that you manage or in which you are invested, please consult your legal counsel.
*This content is made available for general information purposes only, and your access or use of the content does not create an attorney-client relationship between you or your organization and Sydecar, Inc. (“Company”). By accessing this content, you agree that the information provided does not constitute legal or other professional advice. This content is not a substitute for obtaining legal advice from a qualified attorney licensed in your jurisdiction and you should not act or refrain from acting based on this content. This content may be changed without notice. It is not guaranteed to be complete, correct, or up-to-date, and it may not reflect the most current legal developments. Prior results do not guarantee a similar outcome. Please see here for our full Terms of Service.
What is the CTA?
The Corporate Transparency Act (CTA), which was originally passed in 2021 as part of the National Defense Authorization Act, went into effect on January 1, 2024. The goal of the CTA is to combat illegal activities (e.g., tax fraud, money laundering, etc.) by creating more transparency around company ownership. The CTA requires certain U.S. businesses, including limited liability companies and other similar entities, to report identifying information about their beneficial owners to the Department of Treasury’s Financial Crimes Enforcement Network (FinCEN). By requiring the disclosure of beneficial ownership information (BOI), the act intends to peel back the layers of anonymity that have allowed such activities to flourish.
A beneficial owner refers to the person(s) who ultimately own, control, or have significant influence over a company, typically through substantial equity interests or decision-making authority. The CTA mandates that covered entities disclose information about their beneficial owners, including names, birthdates, addresses, and identification numbers (such as a driver’s license or passport number).
What does this mean for VCs?
Unless an entity is exempt, under the CTA, all private companies such as LLCs, corporations, partnerships, and similar entities that do business in the US are mandated to submit BOI for certain beneficial owners. This includes LLCs formed for the purpose of making an investment, such as Sydecar SPVs and funds.
Entities must disclose the name, birthdate, and address, and provide an ID (e.g., a passport or driver’s license) for all beneficial owners. For the purposes of CTA, a beneficial owner is anyone who owns at least 25% of the fund. The fund/SPV manager is also considered a beneficial owner because they possess “significant influence and control” over the entity.
For entities established after December 31, 2023, the initial CTA filings must be submitted within 90 days of their formation date. Entities formed before January 1, 2024, have until January 1, 2025, to submit their initial filings. Starting on January 1, 2025, any new entities created have to submit their filings within 30 days of formation.
How is Sydecar ensuring compliance with CTA requirements?
As always, our goal at Sydecar is to give you peace of mind with your investments so that you can focus on what matters most: finding great deals and building relationships. In response to the CTA reporting requirements, we have built a workflow to collect the required information from all new SPV and Fund+ investors and submit initial and amendment BOI forms to FinCEN on behalf of our customers. We will be collecting identifying information from all investors (not those considered beneficial owners at the time of their subscription), in order to frontload the process. By doing so, we aim to ensure that you remain compliant with the CTA without creating unnecessary friction during the investing process.
Data collection required by CTA will also be integrated into our KYC/EDD process. This means that Sydecar customers likely will not have to take any additional actions outside of the platform to ensure they are in compliance with CTA reporting requirements*.
Request a demo here to learn more about how we help you maintain compliance while streamlining your investment operations.
CTA FAQs
1. What is the Corporate Transparency Act (CTA)?
The CTA, effective January 1, 2024, requires certain U.S. businesses (including corporations, LLCs, and similar entities) to report their beneficial owners to FinCEN to increase corporate ownership transparency and combat illicit financial activities.
2. Who needs to report under the CTA?
U.S.-created or registered corporations, LLCs, or similar entities must report beneficial ownership information to FinCEN. Certain entities, such as publicly traded companies, nonprofits, and certain large operating companies, are exempt from these reporting requirements.
3. When does BOI have to be reported?
Entities formed prior to January 1, 2024, have until January 1, 2025, to report. New entities created in 2024 have 90 days from either the actual notice of formation or public announcement (whichever comes first), and those established from 2025 onwards will have 30 days from notification or public announcement of their formation.
4. What information must be reported to FinCEN?
Entities must report identifying information of their beneficial owners, including names, birthdates, addresses, and ID numbers.
5. What constitutes a beneficial owner under the CTA?
A beneficial owner is someone who ultimately owns, controls, or significantly influences a company, usually through substantial equity interests or decision-making authority. The threshold for beneficial ownership may vary between jurisdictions but for SPVs formed in the state of Delaware (such as Sydecar SPVs), an ultimate beneficial owner is anyone who owns at least 25% of the SPV.
6. How does the CTA affect venture capital investors and fund managers?
VCs, including those managing LLCs, SPVs, or funds, must report BOI by the specified deadlines described above, unless an exemption applies.
7. How is Sydecar facilitating compliance with the CTA for its users?
Sydecar has developed a workflow to collect the required information from beneficial owners of an SPV and submit BOI forms to FinCEN on behalf of its customers, ensuring compliance. The data collection will be integrated into our KYC/EDD process, limiting any unnecessary friction for our customers.
8. Do I need to take any additional actions on Sydecar to comply with CTA?
Sydecar will give all customers the ability to opt-in to our CTA services. For those who opt-in, Sydecar will handle all BOI collection and submit initial and amendment filings to FinCEN on behalf of our customers, meaning that no additional steps outside the platform should be required for compliance. For questions regarding requirements specific to you or any other entities that you manage or in which you are invested, please consult your legal counsel.
*This content is made available for general information purposes only, and your access or use of the content does not create an attorney-client relationship between you or your organization and Sydecar, Inc. (“Company”). By accessing this content, you agree that the information provided does not constitute legal or other professional advice. This content is not a substitute for obtaining legal advice from a qualified attorney licensed in your jurisdiction and you should not act or refrain from acting based on this content. This content may be changed without notice. It is not guaranteed to be complete, correct, or up-to-date, and it may not reflect the most current legal developments. Prior results do not guarantee a similar outcome. Please see here for our full Terms of Service.
What is the CTA?
The Corporate Transparency Act (CTA), which was originally passed in 2021 as part of the National Defense Authorization Act, went into effect on January 1, 2024. The goal of the CTA is to combat illegal activities (e.g., tax fraud, money laundering, etc.) by creating more transparency around company ownership. The CTA requires certain U.S. businesses, including limited liability companies and other similar entities, to report identifying information about their beneficial owners to the Department of Treasury’s Financial Crimes Enforcement Network (FinCEN). By requiring the disclosure of beneficial ownership information (BOI), the act intends to peel back the layers of anonymity that have allowed such activities to flourish.
A beneficial owner refers to the person(s) who ultimately own, control, or have significant influence over a company, typically through substantial equity interests or decision-making authority. The CTA mandates that covered entities disclose information about their beneficial owners, including names, birthdates, addresses, and identification numbers (such as a driver’s license or passport number).
What does this mean for VCs?
Unless an entity is exempt, under the CTA, all private companies such as LLCs, corporations, partnerships, and similar entities that do business in the US are mandated to submit BOI for certain beneficial owners. This includes LLCs formed for the purpose of making an investment, such as Sydecar SPVs and funds.
Entities must disclose the name, birthdate, and address, and provide an ID (e.g., a passport or driver’s license) for all beneficial owners. For the purposes of CTA, a beneficial owner is anyone who owns at least 25% of the fund. The fund/SPV manager is also considered a beneficial owner because they possess “significant influence and control” over the entity.
For entities established after December 31, 2023, the initial CTA filings must be submitted within 90 days of their formation date. Entities formed before January 1, 2024, have until January 1, 2025, to submit their initial filings. Starting on January 1, 2025, any new entities created have to submit their filings within 30 days of formation.
How is Sydecar ensuring compliance with CTA requirements?
As always, our goal at Sydecar is to give you peace of mind with your investments so that you can focus on what matters most: finding great deals and building relationships. In response to the CTA reporting requirements, we have built a workflow to collect the required information from all new SPV and Fund+ investors and submit initial and amendment BOI forms to FinCEN on behalf of our customers. We will be collecting identifying information from all investors (not those considered beneficial owners at the time of their subscription), in order to frontload the process. By doing so, we aim to ensure that you remain compliant with the CTA without creating unnecessary friction during the investing process.
Data collection required by CTA will also be integrated into our KYC/EDD process. This means that Sydecar customers likely will not have to take any additional actions outside of the platform to ensure they are in compliance with CTA reporting requirements*.
Request a demo here to learn more about how we help you maintain compliance while streamlining your investment operations.
CTA FAQs
1. What is the Corporate Transparency Act (CTA)?
The CTA, effective January 1, 2024, requires certain U.S. businesses (including corporations, LLCs, and similar entities) to report their beneficial owners to FinCEN to increase corporate ownership transparency and combat illicit financial activities.
2. Who needs to report under the CTA?
U.S.-created or registered corporations, LLCs, or similar entities must report beneficial ownership information to FinCEN. Certain entities, such as publicly traded companies, nonprofits, and certain large operating companies, are exempt from these reporting requirements.
3. When does BOI have to be reported?
Entities formed prior to January 1, 2024, have until January 1, 2025, to report. New entities created in 2024 have 90 days from either the actual notice of formation or public announcement (whichever comes first), and those established from 2025 onwards will have 30 days from notification or public announcement of their formation.
4. What information must be reported to FinCEN?
Entities must report identifying information of their beneficial owners, including names, birthdates, addresses, and ID numbers.
5. What constitutes a beneficial owner under the CTA?
A beneficial owner is someone who ultimately owns, controls, or significantly influences a company, usually through substantial equity interests or decision-making authority. The threshold for beneficial ownership may vary between jurisdictions but for SPVs formed in the state of Delaware (such as Sydecar SPVs), an ultimate beneficial owner is anyone who owns at least 25% of the SPV.
6. How does the CTA affect venture capital investors and fund managers?
VCs, including those managing LLCs, SPVs, or funds, must report BOI by the specified deadlines described above, unless an exemption applies.
7. How is Sydecar facilitating compliance with the CTA for its users?
Sydecar has developed a workflow to collect the required information from beneficial owners of an SPV and submit BOI forms to FinCEN on behalf of its customers, ensuring compliance. The data collection will be integrated into our KYC/EDD process, limiting any unnecessary friction for our customers.
8. Do I need to take any additional actions on Sydecar to comply with CTA?
Sydecar will give all customers the ability to opt-in to our CTA services. For those who opt-in, Sydecar will handle all BOI collection and submit initial and amendment filings to FinCEN on behalf of our customers, meaning that no additional steps outside the platform should be required for compliance. For questions regarding requirements specific to you or any other entities that you manage or in which you are invested, please consult your legal counsel.
*This content is made available for general information purposes only, and your access or use of the content does not create an attorney-client relationship between you or your organization and Sydecar, Inc. (“Company”). By accessing this content, you agree that the information provided does not constitute legal or other professional advice. This content is not a substitute for obtaining legal advice from a qualified attorney licensed in your jurisdiction and you should not act or refrain from acting based on this content. This content may be changed without notice. It is not guaranteed to be complete, correct, or up-to-date, and it may not reflect the most current legal developments. Prior results do not guarantee a similar outcome. Please see here for our full Terms of Service.
Disclaimer: This content is made available for general information purposes only, and your access or use of the content does not create an attorney-client relationship between you or your organization and Sydecar, Inc. (“Company”). By accessing this content, you agree that the information provided does not constitute legal or other professional advice, including but not limited to: investment advice, tax advice, accounting advice, legal advice or legal services of any kind. This content is not a substitute for obtaining legal advice from a qualified attorney licensed in your jurisdiction and you should not act or refrain from acting based on this content. This content may be changed without notice. It is not guaranteed to be complete, correct or up to date, and it may not reflect the most current legal developments. Prior results do not guarantee a similar outcome. Please see here for our full Terms of Service.