If you are looking to start an LLC then there are many things to take care of instead of just looking at the benefits of forming an LLC instead of choosing any other form of company. Well, there is a long checklist that everyone forming an LLC should have but in this blog post, we are going to discuss the role of the Corporate Transparency Act in the case of series LLCs.
Even with a lot of information related to LLC and Corporate Transparency is available on the internet but still there is a lot of confusion among people as to how this act affects the series LLC. While forming an LLC, you should cover all its aspects, including the corporate transparency act.
So, let’s look at everything you need to know about the Corporate Transparency act and its effect on series LLCs.
What is the Corporate Transparency Act?
Corporate Transparency Act or CTA is a type of new legislation and according to this legislation, all the firms are supposed to file the information related to beneficial ownership with FinCEN. In this case, a beneficial owner is a person who has substantial control over the company in either direct or indirect form.
The beneficial owner can also have 25% of the ownership interest. According to the act, FinCEN filing should also involve those individuals or applicants who form a firm for every small business entity.
All the newly formed firms need to file this information and if there is a previously established company then it needs to file otherwise they might have to deal with a long list of financial penalties.
But in this case, the compliance doesn’t start for previous companies until 2024 and until 2022 for new companies. If you are trying to find how to start an LLC in NY then you must be aware of the basics of CTA otherwise you might end up paying penalties.
The effect of Corporate Transparency Act on Series LLC
All the filed entities are regulated under CTA and this is why it includes the series LLC as well. If there is a Delaware Series LLC then according to the CTA, there is a need for one FinCEN filing.
It is also true that the protected series that is established by private operating agreements keeps the legal persons separated but still they are part of a similar juridical entity. This usually happens during additional state filings.
The arguments related to CTA and its effect on series LLCs
There have been many arguments in the past regarding the requirement of filing a CTA filing report only by the mothership Delaware Series LLC. All the daughter-protected series should not have to file a report because they are built only by a private operating agreement and they are never filed or formed. Well, the final points of these regulations are going to be clarified before January 2022.
The real reason why such arguments have been raised in the past is if there will be a necessity of filing separate beneficial ownership reports for all the protected series and the Delaware Series LLCs then this will put a lot of burden on the businesses without any reason. And even the benefits offered to financial investigators and institutions will be minimum.
If there is a beneficial owner of a series LLC then the owner can have control over many protected series and this is where the real issue arises. A large number of beneficial ownership filings from Series LLC can lead to problems with administrative registers. All this information can come in handy when you are searching for how to form an LLC in NY.
Complying with CTA
If you are not familiar with forms and terminology then complying with CTA can prove to be a daunting task in your case and this is why understanding how CTA works before searching for how to form an LLC in NY becomes a matter of uttermost importance.
The bad news is there is no online platform for FinCEN where you can easily file the beneficial ownership and there is no sandbox to test what the filing actually looks like. But everyone is expecting this online system to be launched soon as it will make the daunting task of filing easier and clearer to the business owners.
In addition to this, it is being expected that registered agents will be available to assist you with the filing process by 2022 and therefore, you will have a much smoother process of filing in the future. Till then, you can keep gathering all the information related to FinCEN, CTA, and series LLCs available on the internet and build a seamless process for dealing with such types of acts instead of falling into the pitfall and ending up paying the penalties.