The Corporate Transparency Act (CTA) was passed as part of the 2021 National Defense Authorization Act, but went into effect on January 1, 2024. It aims to crack down on ”ghost” or fraudulent companies that could be used for money laundering, tax evasion, and other illicit activities. To prevent these illicit activities, the CTA requires certain entities to report beneficial ownership information to the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of the Treasury.
The impact of the CTA is substantial. The reporting requirements of the CTA will obligate approximately 30 million U.S. businesses, including a large number of small businesses, mid-sized businesses, startups, and privately held companies. It is imperative that these businesses comply with the reporting requirements during the reporting period or be subject to fines upward of $500 per day.
Reporting requirements for the CTA began on January 1, 2024. If you are a businesses owner who formed or registered your corporation before that date, you will have until January 1, 2025 to file your initial report. Businesses formed after January 1, 2024, must file within 30 days of formation or registration.
Are you a business owner? To ensure compliance with the CTA reporting requirements, including FinCEN reporting, LPJ Legal touts over a decade of experience helping businesses navigate legal matters of all complexities. For a consultation, visit our website, or call us directly at 202-643-6211.
If you own a business, or are creating a business, you must be familiar with the CTA reporting requirements. By 2025, providing FinCEN with the required beneficial ownership information will be as commonplace as filing for an EIN.
How to Report Beneficial Ownership Information to FinCEN
1. Who Needs to Report?
- Affected Entities: The CTA primarily applies to corporations, LLCs, and similar entities that are created by filing documents with a state or tribal authority.
EXEMPTIONS: Some companies are exempt, including publicly traded companies, and larger firms with over 20 full-time employees, over $5 million revenue, and those with a physical presence in the U.S. Certain regulated entities like banks, credit unions, and insurance companies are also exempt.
- Individuals: Owners and those with control over a company (known as beneficial owners) must be disclosed. A beneficial owner could be anyone who A. Owns at least 25% of the company, or B. Exercises significant control over the company, like making key decisions.
2. What Should You Do to Report?
To ensure compliance with the Corporate Transparency Act, here’s what you should do:
- Identify Beneficial Owners: Determine who the beneficial owners of your company are. These are individuals who own or control 25% or more of the company or have substantial influence over its operations.
- Prepare to Report: You will need to provide FinCEN with specific information, including the full legal name of each beneficial owner, their date of birth, their current residential or business address, and a unique identifying number from an acceptable identification documents (such as a passport or drivers license).
- File Reports: Starting January 1, 2024, for newly formed companies, and by January 1, 2025, for existing entities, file the required information with FinCEN. Updates must be made within 30 days if there are any changes to the beneficial owners or the information provided.
- Update Regularly: If beneficial ownership changes, you must update your report within 30 days.
3. Consequences of Non-Compliance
Failing to comply with the CTA can result in significant penalties, including:
- Civil Fines: Up to $500 per day for each day the violation continues.
- Criminal Penalties: Fines up to $10,000 and/or up to two years in prison.
Are you a business owner? To ensure compliance with the CTA reporting requirements, including FinCEN reporting, LPJ Legal touts over a decade of experience helping businesses navigate legal matters of all complexities. For a consultation, visit our website, or call us directly at 202-643-6211.
