Business Ownership Insights: Corporate Transparency Act

Summary:

The Corporate Transparency Act (CTA), effective January 1, 2024, impacts millions of small businesses across the U.S.

Our Perspective:

If you are a business owner, it is likely the CTA applies to you. The CTA, passed by Congress in 2021, intends to help combat money laundering and tax evasion. It does this by creating a nationwide beneficial-ownership registry for companies operating in the U.S. and then requiring companies to report this information starting in 2024. This means if you have an ownership interest in any kind of business entity (e.g., corporation, LLC), your company may need to collect your personal information and report it to the Financial Crimes Enforcement Network (FinCEN).

Who does this law affect?

FinCEN is collecting ownership information on “reporting companies.” A reporting company is an entity created by filing with a secretary of state, namely, corporations or limited liability companies (LLCs).

What information is collected?

FinCEN wants to know who owns the company – what they call a “beneficial owner.” A beneficial owner is any individual who (i) exercises control over the company or (ii) owns at least 25% of the ownership interest of the company. The following information must be reported about ALL beneficial owners:

Name
Date of Birth
Address
Passport or driver’s license number
Photocopy of driver’s license

If there is a change in beneficial ownership, it must be reported within 30 days of the change.

Where is this information filed?

FinCEN has a dedicated website for the filing of information required by the CTA: www.fincen.gov/boi

Is there a deadline?

If your company existed before 2024, then your company has until the END of 2024 to complete the reporting requirement. For companies created in 2024 and moving forward, the deadline is 30 days from entity formation.

What if my company does not comply?

Failure to file a timely report with FinCEN can result in civil and criminal fines ($500 / day up to $10,000) and potentially even imprisonment. For our clients with an ownership interest in a business, we strongly encourage you to consult your legal or tax advisor to ensure you meet these reporting requirements.