Blog Post Written By: Melrose Michaels
Corey Silverstein has been the adult industry's premier IT attorney since 2006, representing websites, hosts, processors, ad networks, and more. He is the founder and managing partner of the law firm Silverstein Legal, the best source for legal representation relating to the adult industry. Additionally, he founded adult.law, a low-cost monthly membership service for adult entrepreneurs to access legal resources and expertise, a robust library of legal, policy, and business information that speaks to the specific needs of those working in the adult industry, along with regular updates and briefings on new policies and case law, as the legal landscape of the adult industry is constantly in flux.
What is the Corporate Transparency Act?
Silverstein explains that the Corporate Transparency Act (CTA) was enacted in 2021 to address concerns of government agencies in tracking beneficiaries behind businesses and tackling financial crimes. The Act has now become a hot topic as it will soon come into effect on January 1, 2024.
The CTA applies explicitly to businesses that were established due to a filing with a state, such as an LLC, a corporation, or a registered partnership. The Act requires such businesses to register and provide certain information to the Financial Crimes Enforcement Network (FinCEN) under the U.S. Treasury Department, making the registration process an essential legal obligation. Silverstein emphasizes that this applies not only to U.S.-based businesses but also to foreign entities registered to do business in the U.S.
Implications for Adult Industry
While the Act primarily targets entities hiding behind shell companies, it holds significant implications for businesses in the adult entertainment industry. Any adult creator with a business entity or planning to create one must comply with the CTA.
To comply with the CTA, businesses need to provide their names, dates of birth, addresses, and identification documents. The Act targets the true beneficiaries of an entity, individuals who own at least 25% of a business or who exercise substantial control over the entity.
Information Protection Under the CTA
An understandable concern when providing such detailed information to the government is data security. While the Act permits FinCEN to release data under certain circumstances, such as a bank or federal regulator request, it requires FinCEN to hold the information confidentially and securely.
Despite these safeguards, Silverstein does stress that banks might scrutinize the relationship with such businesses more closely under the Act. Businesses in the adult entertainment industry needing to open new accounts or engage in financial transactions might be particularly affected.
Maintaining Transparency and Protecting Business Information
Rest assured, the information provided to FinCEN will be kept confidential, barring situations that meet the stringent criteria for the release of such data. However, adult content creators are advised to remain vigilant and plan well while forming their entities. Seeking independent advice is strongly recommended, as is considering forming an entity in a jurisdiction that provides better security and keeps public information to a minimum.
Non-Compliance and Penalties
Non-compliance with the CTA is fraught with civil and potentially criminal penalties. Civil penalties of up to $500 per day and fines of up to $10,000, along with potential prison sentences, highlight compliance's essentiality.
In conclusion, Silverstein underlines the importance of understanding and complying with the Corporate Transparency Act by taking appropriate steps to register with the FinCEN. He also invites any content creators with further questions or concerns to reach out to him via social media and live platforms for more in-depth discussions. As the implementation of this Act will have far-reaching implications, he encourages all adult content creators to stay informed and stay ahead of the curve.
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