23 Jan The Corporate Transparency Act: What You Must Know
Thank you to our client Rudy Minasian (Minasian Law) for providing the information in this article, in order to educate the Reconciled Solutions’ community of entrepreneurs about the Corporate Transparency Act.
Beginning on January 1, 2024, the Corporate Transparency Act (“CTA”) took effect.
The Corporate Transparency Act is a law enacted by Congress that is intended to combat money laundering, tax fraud, and even terrorism. It requires U.S.-operating entities to disclose certain ownership information to a branch of the U.S. Treasury known as the Financial Crimes Enforcement Network (FinCEN). The government’s attempt to thwart bad actors comes with a price, as most every state-registered company is required to report ownership structure and specific details on beneficial owners and those with substantial control in a company or corporation. The definitions of ‘beneficial owners’ and ‘substantial control’ are quite broad and may involve legal/financial analysis to determine.
Who is exempt from filing?
Certain entities that are already registered with government agencies, such as publicly-traded companies, banks, insurance companies, and securities dealers are exempt from reporting. Also exempt are sole proprietorships, and tax-exempt entities registered with the IRS.
Who must file?
Those who must adhere to the CTA filing requirements include LLCs, which are commonly used by small businesses. Non-exempt companies must electronically report specific information about the company itself and the individuals who directly or indirectly own (at least 25% of the company) or control the company (“Beneficial Owners”) including name, date of birth, residential address, and an identifying number (such as a driver’s license number). Importantly, a reporting company must provide a U.S. street address – a P.O. Box is not acceptable.
How do I report?
Businesses must provide FinCEN with information about their beneficial owners, and may do so using FinCEN’s reporting portal.
What is the deadline for me to report?
Business entities created or registered before 2024 have until December 31, 2025 to report. Companies created in 2024 have a 90-day window to report. Companies created after 2024 have a 30 day window to report. Although the registration is a one-time event, changes to ownership require an amendment to the registration. This could include a name change (due to marriage or otherwise) or substantial control (such as a new company president).
What if I don’t comply?
Penalties for failure to register are stiff; fines of up to $500 per day and even jail time for up to two years are possible. Please be sure to register in 2024 and contact your attorney or accountant for further details!
