Commencing January 1, 2024, millions of U.S. companies are required to file first-time paperwork with the U.S. Department of the Treasury. Fail to comply with the reporting requirements, and you may face financial penalties or even jail time. To better understand what is required and prepare your company to stay compliant, here is a guide to the Corporate Transparency Act.:
If your company needs assistance with CTA compliance, please contact the business law firm of MBM Law for assistance.
What is the Corporate Transparency Act (CTA)?
The CTA will require all “reporting companies” to disclose certain information about their beneficial owners to FinCEN. It was enacted January 1, 2021; as part of the Anti-Money Laundering Act of 2020. The Corporate Transparency Act was enacted to fight corruption and protect U.S. financial system from illicit use and provide essential information to national security, intelligence, and law enforcement agencies.
MBM Law has experienced business attorneys that can assist your business start preparing for the 2025 CTA compliance deadline. Please call today to discuss your Corporate Transparency Act compliance concerns.
CTA Compliance Key Points:
Starting Jan. 1, 2024, under the CTA, all entities, unless exempt, formed or registered to do business in the United States will need to either (i) confirm they qualify for an exemption from the CTA’s reporting requirements or (ii) timely submit a beneficial ownership information (BOI) report to the U.S. Treasury’s Financial Crimes and Enforcement Network (FinCEN).
Corporate Transparency Act Key Definitions:
- A “reporting company” is a corporation, LLC, or other entity that is created by the filing of a document with a secretary of state or any similar office under the law of a State, unless otherwise exempt from reporting.
- “Beneficial Owner” is any individual who, directly or indirectly, either exercises substantial control over a reporting company or owns or controls at least 25% of the ownership interests of a reporting company.
- “Company Applicant” includes a maximum of two individuals: (i) the person who directly files the formation or registration document of the reporting company and (ii) the person who was primarily responsible for directing such filing. Note: Entities formed prior to Jan. 1, 2024, will not need to provide BOI reports for their applicants.
2025 CTA Compliance Timeline:
- Existing entities formed prior to Jan. 1, 2024, will have one year from that date, that is – until January 1, 2025, to file their initial BOI report.
- New entities formed on or after Jan. 1, 2024 and before Jan. 1, 2025, must file their initial BOI report within 90 days after their formation. New entities formed after Jan. 1, 2025 must file their initial BOI report within 30 days after their formation.
- After the initial report, there is no annual or quarterly filing requirement. However, reporting companies must file an amendment within 30 days after any change to their reported information.
- If a report contained inaccurate information at the time of filing, the reporting company must file a corrected report within 30 days after the company becomes aware of or has reason to know of the inaccuracy.
What Are the CTA Compliance Reporting Requirements?
Fincen has established an on-line portal for electronic filing of the BOI reports. Each BOI report must disclose certain information about the reporting company (name, address, taxpayer identification number) and its “beneficial owners” and “applicants” (full legal name, date of birth, residential address, and passport or driver’s license number, with a photocopy of such document).
Will the BOI reports be publicly available?
No, the information from your BOI report will not be publicly available. Generally, it will be disclosed only (i) to federal and state law enforcement agencies in specified circumstances and (ii) with the reporting company’s consent, to financial institutions in connection with their know-your-customer obligations, and to the regulators of such financial institutions.
What Are the Penalties for CTA Noncompliance?
The CTA provides for both civil and criminal penalties (civil fines of up to $500 per day and criminal penalties of up to $10,000 in fines or up to two years’ imprisonment) for willfully providing false information, failing to provide complete information or failing to update information. Senior officers may be held accountable under the CTA for the failure to file.
What types of entities are exempt from the CTA’s reporting requirements?
There are 23 listed exemptions, and if exempt, no further action is required. The main exemptions are:
- “Large operating companies,” which are entities that (i) have more than 20 full-time U.S. employees (not counting employees of affiliated entities), (ii) reported more than $5 million of revenue from U.S. sources on a consolidated basis to the IRS for the previous year and (iii) have an operating presence at a physical location in the United States.
- Nonprofit entities, political organizations, and certain tax-exempt trusts.
- Public companies, insurance companies, banks, registered investment companies, registered investment advisers, and certain other entities already subject to regulatory oversight.
- Subsidiaries that are wholly owned, directly or indirectly, by the foregoing exempt entities.
Speak to a Corporate Attorney for CTA Compliance
The Pittsburgh business attorneys of MBM Law have over 50 years of experience assisting clients with their legal concerns. If you have any questions about compliance with CTA guidelines for 2024, or before the CTA deadline in 2025, then please contact Maiello Brungo & Maiello.