LOS ANGELES — Performers and creators who have formed limited liability companies (LLCs) are being advised to consult with accounting and legal professionals before the Jan. 1, 2024 implementation of the new Corporate Transparency Act (CTA).
The CTA was enacted in 2021 in order to “enhance transparency in entity structures and ownership to combat money laundering, tax fraud, and other illicit activities,” Thomson Reuters reports, noting that the law was designed to “capture more information about the ownership of specific entities operating in or accessing the U.S. market.”
The CTA compels U.S. LLC-holders to register any other entity owned by or created by them, and to submit their personal information, including Social Security numbers, to the Financial Crimes Enforcement Network (FinCEN) of the U.S. Department of the Treasury.
After its 2021 passage, the CTA “was largely ignored by accounting professionals at first,” Thomson Reuters reports. As the effective date approaches in a few weeks, however, “people are starting to panic.”
Some adult performers and creators have registered LLCs, especially around 2018-2020, following the passage of several new California labor regulations concerning freelance work.
XBIZ consulted with industry attorney Corey Silverstein of Silverstein Legal, who explained, “It makes perfect sense that individual performers who have formed an entity that falls within the CTA — and does not meet one of the exemptions — are concerned.”
However, Silverstein noted, it is important to point out that for those individuals who have sought an Employer Identification Number (EIN) for their LLC and provided accurate information on their tax returns, the U.S. government already has access to that data.
Nonetheless, Silverstein concluded, “Anyone who has formed an entity, including individual performers, agencies and website operators — especially those who have not applied for an EIN before — should be consulting with their lawyers and accountants regarding the CTA before the start of the new year.”
Fellow attorney Nick Zargarpour noted that the CTA also applies to people that have formed corporations besides LLCs.
“Unless you are subject to one of the exemptions — which most companies in this industry will not be — just because you have provided the information when you got the Employer ID Number (EIN) from the IRS or filed your taxes, it doesn’t mean you don’t have to file under the CTA. You still have to file with FinCEN.”
