As of January 1, 2024, the Corporate Transparency Act (CTA) has ushered in a major shift in U.S. business ownership. The CTA aims to enhance transparency by requiring the identification of “beneficial owners” for a wide range of companies. Specific business entities have to report their beneficial owners to the Financial Crimes Enforcement Network (FinCEN). By requiring the identification of these individuals, the CTA aims to lessen financial crimes such as money laundering and tax evasion. This enhanced transparency empowers law enforcement to identify people who may attempt to utilize businesses for illegal purposes.
Who Needs to Comply?
The CTA applies to a range of domestic and foreign business entities, including:
- Limited Liability Companies (LLCs)
- Corporations
- Entities formed by filing with a Secretary of State (or similar office)
These entities are collectively referred to as “reporting companies.” Exemptions exist, so consulting with legal counsel is recommended to determine if your business qualifies.
What Information is Required?
All reporting companies must submit details regarding both the company itself and its beneficial owners. A beneficial owner is defined as an individual with substantial control or ownership exceeding 25% of the company’s interests. There’s no limit on the number of reported beneficial owners.
Filing Deadlines and Updates
For companies established after January 1, 2024, additional information about the “company applicant” is required. This refers to the individual filing the creation documents or the one primarily responsible for overseeing the filing process.
Existing companies have a one-year grace period (until January 1, 2025) to file their initial beneficial ownership information (BOI) report. Newly formed or registered companies have either 90 or 30 days to file, depending on their formation date.
Should any changes in the reported information concerning the reporting company or its beneficial owners, including changes in ownership, the company must furnish an updated BOI report to FinCEN within 30 days of the modification’s occurrence. In instances where inaccuracies are detected subsequent to the filing of the report, the company is obliged to submit a corrected BOI report to FinCEN within 30 days of identifying the discrepancy.
Data Privacy and Security
The Corporate Transparency Act (CTA) ensures the confidentiality of the collected beneficial ownership information. Access is restricted to authorized government agencies for legitimate law enforcement, national security, and anti-money laundering investigations. Additionally, certain financial institutions may be granted access for specific reporting obligations mandated by their regulatory bodies, as well as regulatory agencies overseeing those financial institutions.
How to File:
BOI reports are submitted directly to FinCEN, or through a third-party provider. While business formation or registration occurs with your state’s Secretary of State, the CTA filing process is separate.
Understanding Exemptions
Publicly traded companies, certain large operating companies, and entities meeting specific criteria may be exempt from the CTA. Consulting with a professional advisor ensures you navigate the exemptions correctly.
Consequences of Non-Compliance:
Failing to file initial, updated, or corrected reports, or providing false or misleading information, can lead to significant consequences, including hefty fines and potential criminal charges.
By enhancing ownership transparency, the Corporate Transparency Act (CTA) aims to create a more secure and fair business environment for all participants. Understanding your obligations under this new law will ensure smooth compliance and responsible business practices. If you have any questions or require assistance understanding the CTA’s requirements, our attorneys at Grissom Law, LLC are here to help. Our experienced attorneys can provide guidance to ensure your business remains compliant. Please don’t hesitate to contact us at 678.781.9230 to schedule a consultation.
Disclaimer
This Blog/Web Site is made available for educational purposes only as well as to give you general information and a general understanding of the law, not to provide legal advice. By using this blog site you understand that there is no attorney client relationship between you and Grissom Law, LLC