The Corporate Transparency Act (CTA) is a game-changer for businesses, and every small business owner should be aware of its implications. Set to become effective on January 1, 2024, the CTA introduces vital reporting requirements that can have significant consequences for non-compliance. Here’s a breakdown of the key points you need to know:

Purpose of the CTA: The CTA primarily serves as an anti-money laundering law. It aims to combat money laundering, financing of terrorism, tax fraud, and other illicit activities by preventing the concealment of ownership in corporations, LLCs, and similar entities.

Who Must File a BOI Report? Any entity created by filing with a Secretary of State or a similar office under state or tribal law must file a Beneficial Ownership Information (BOI) report, unless it qualifies for one of the 23 exemptions. Domestic reporting companies, as well as certain foreign reporting companies, fall under this requirement.

Exemptions to Filing: Numerous exemptions exist, primarily for entities already subject to substantial federal or state regulation. This includes publicly traded companies, financial institutions, tax-exempt entities, and more. “Large operating companies” meeting specific criteria also enjoy an exemption.

What Information Must Be Reported: For domestic reporting companies, the report should include the company’s legal name, trade names, principal address, jurisdiction of formation, and taxpayer identification number. Beneficial owners and applicants’ information, such as full legal names, birthdates, addresses, unique identifying numbers, and document images, must also be reported.

Who Are Beneficial Owners and Company Applicants? Beneficial owners are individuals who control or own at least 25 percent of the company. Company applicants are those responsible for creating or registering the entity.

Reporting Deadlines:

• Domestic reporting companies created before January 1, 2024, must file their initial BOI report by January 1, 2025.
• Those created on or after January 1, 2024, but before January 1, 2025, have 90 days to file.
• Entities created after January 1, 2025, must file within 30 days.

Updates and Corrections: If there are changes in reported information, including ownership or exemption eligibility, companies must file updated reports within 30 days. Corrections to inaccurate reports should also be filed promptly.

How to File BOI Reports: All BOI reports will be submitted electronically through FinCEN’s secure system, accessible via their website. The good news is, there’s no fee for filing these reports.

Preparation for Small Businesses: Small business owners should determine if their entity qualifies as a reporting company under the CTA. If so, they should plan when to file their initial BOI report, gather the required information, and establish a system to keep track of reported data and update it as needed.

Access to BOI Information: FinCEN is authorized to disclose BOI to specific requestors, including federal agencies, state law enforcement with court orders, financial institutions with consent, and government regulators.

Penalties for Non-Compliance: There are both criminal and civil penalties permitted under the CTA for non-compliance: the civil penalty is not more than $500 per day. The criminal penalty is a fine of not more than $10,000, imprisonment for not more than 2 years, or both. So it is very important for small business owners to be aware of this law, and to take steps to ensure compliance.

While the CTA does introduce added responsibilities, it aims to create a more transparent and secure business environment. It’s essential for small business owners to stay informed, plan ahead, and seek professional guidance if needed to ensure a smooth transition into this new era of corporate transparency. Compliance is key, and preparation will be your ally in meeting these new reporting requirements.

For more information and resources, visit FinCEN’s website or consult with your attorney or another expert in business compliance. Your commitment to transparency and compliance will help your business thrive in the evolving regulatory landscape.

💼🔍 #CTA2024 #SmallBusinessOwners #CorporateTransparency #ComplianceMatters #LegalWebsiteWarrior #BusinessAttorney

DISCLAIMER: THE INFORMATION PROVIDED IN THIS POST MAY CONTAIN LEGAL INFORMATION, BUT DOES NOT CONSTITUTE LEGAL ADVICE. NO RELATIONSHIP, INCLUDING ATTORNEY-CLIENT RELATIONSHIP, HAS BEEN FORMED AS A RESULT OF THIS POST. YOU ARE ADVISED TO SEEK THE ADVICE OF AN ATTORNEY LICENSED IN YOUR STATE IF YOU HAVE ANY QUESTIONS.

First published December 30, 2023 on The Legal Website Warrior®.

© 2023 Heather Pearce Campbell, The Legal Website Warrior®