What is the Corporate Transparency Act (CTA)?
The Corporate Transparency Act is a federal law enacted in 2021 as part of the National Defense Authorization Act. Its primary goal is to prevent money laundering, terrorism financing, and other illicit financial activities by promoting transparency within corporate structures.
When are reports due?
The deadline for filing a Beneficial Ownership Information (BOI) report depends on when the company was created or registered to do business in the United States:
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Before January 1, 2024: The deadline to file the initial BOI report is January 1, 2025.
- It is important to note that it has taken many businesses who are submitting their initial reports 2-4 months to collect the information and that FinCEN themselves have said that their system will not be able to handle the millions of year-end filings. We strongly encourage companies to secure their BOI filing solution immediately to ensure they meet the deadline and put BOI reporting behind them.
- In 2024: The deadline to file the initial BOI report is 90 calendar days after receiving notice that the company's creation or registration is effective.
- On or after January 1, 2025: The deadline to file the initial BOI report is 30 calendar days after receiving notice that the company's creation or registration is effective.
What does the Corporate Transparency Act (or this new legislation) require from businesses?
The Corporate Transparency Act requires entities to report the individuals with ownership and controlling stake to the federal government. This involves submitting beneficial ownership information to the Financial Crimes Enforcement Network and notifying the agency of any changes to the information as they occur.
When does the Corporate Transparency Act come into effect?
The reporting requirement of the CTA is effective on January 1, 2024. FinCEN began accepting beneficial ownership information reports on that date.
What information is required for Beneficial Ownership Reporting?
Key details required include the entity’s name, any trade or DBA names, state of formation, federal EIN, ID number from its domicile Secretary of State, the entity’s primary address within the US, full legal name of each beneficial owner, unique identifying number from an acceptable identification document, and more.
What does "beneficial owner" mean exactly?
Beneficial owners have substantial control over or receive substantial economic benefits from a legal entity. This may be an individual who owns or controls at least 25% of the ownership interest and/or exercises substantial control over the company. Substantial control can be determined by:
- Senior officers
- Individuals with the power to appoint or remove senior officers
- Important decision-makers
- Anyone who otherwise has significant control over the company’s operations
What does "beneficial owner" mean exactly?
While the Corporate Transparency Act broadly applies to corporations and LLCs, specific exemptions exist. More heavily regulated entities such as banks, credit unions, investment companies, and entities already required to report certain information to the federal government are exempt from the reporting requirements. Each entity must review the Corporate Transparency Act and its regulations to determine if they fall under an exempt category. All organizations should consult with their legal counsel to understand their reporting obligations and possible exemptions under the CTA.
What are the penalties for non-compliance?
Failure to comply with the Corporate Transparency Act can result in significant penalties. These may include fines of $591 per day, up to $11,820 per violation, or even criminal penalties of up to 2 years of federal imprisonment for willful violations.
What are the benefits of this for legitimate businesses?
For legitimate businesses, beneficial ownership reporting promotes a more transparent and trustworthy business climate. It helps prevent unfair competition from entities engaging in illicit activities, creating a more level playing field for all businesses.
How can I prepare for Beneficial Ownership Reporting?
Businesses can prepare by conducting an internal review of their company's structure and ownership hierarchy, collecting necessary documentation for each beneficial owner, establishing a centralized record-keeping system, ensuring regular updates, and training staff members for ongoing compliance. Our reporting service ensures your initial filing is completed, and updates and changes are managed as needed.
I still have questions. Who can I talk to?
Please contact us.