Coporate Transparency Act
Dear Friends,
I hope you have been enjoying the fall weather as much as I have! I am writing today to bring your attention to an upcoming deadline for the Corporate Transparency Act, which may require action from you by December 31 if you are a business owner of a business entity like an LLC or a corporation.
The Corporate Transparency Act (“CTA”) came into effect at the start of 2024. The purpose of the act is to increase government oversight of company ownership and prevent illegal activity, such as money-laundering. The CTA requires entities to report certain data to the government, and imposes heavy fines for noncompliance. The deadline to file an initial report is January 1, 2025.
Here is a rundown of what you need to know about the CTA, and what actions you need to take if the CTA applies to you:
Which Entities Does the CTA Apply to?
Entities required to report under the CTA are called “reporting companies.” There are two types of reporting companies:
- “Domestic reporting companies” are corporations, limited liability companies, and any other entities created by the filing of a document with a secretary of state or any similar office in the United States.
- “Foreign reporting companies” are entities (including corporations and limited liability companies) formed under the law of a foreign country that have registered to do business in the United States by the filing of a document with a secretary of state or any similar office.
- Certain entities are exempt from the reporting requirements; you can find more information on exempt entities here.
If you hold an interest in an entity (a.k.a. “own” all or part of an entity) that falls under the definition of a reporting company, then the CTA applies to you, and you need take steps to ensure you and/or your entity are in compliance.
What Do You Need to Do if the CTA Applies to You?
If the CTA applies to you, then you will need to provide beneficial ownership information about each reporting company you have to the Financial Crimes Enforcement Network (“FinCEN”). The deadline to report this information is January 1, 2025. Here is a summary of the steps you need to take to comply with the CTA:
- First, you can acquire “FinCEN identifier” for you as an individual as well as for each of your reporting companies.
- A FinCEN identifier is a unique number issued by FinCEN to identify an individual or reporting company within its system. Having a FinCEN identifier is not required, but it can save you time in the future as the number can be used in place of re-typing all of the holder’s information when filing reports with FinCEN.
- You can request a FinCEN identifier here.
- Once you have acquired a FinCEN identifier, you will need to submit a Beneficial Ownership Information Report (“BOIR”) for each reporting company.
- BOIRs are submitted through FinCEN’s BOI portal, which can be found here.
- “Beneficial ownership information” refers to identifying information about the individuals who directly or indirectly own or control an entity.
- You will also need to include information about the entity itself, such as its legal and trade names.
- If your reporting company was created or registered after January 1, 2024, you will also need to report the “company applicant(s)” for your entity.
- If the information you report changes in the future, such as a change in address, you will need to keep FinCEN updated by filing updated reports as needed.
What Are the Consequences if You Fail to Comply?
Failure to comply with the CTA’s reporting requirements can have severe consequences. Violations include failing to report the appropriate information to FinCEN, intentionally reporting false information, or failing to keep reported information up to date.
- A person who willfully violates the BOI reporting requirements will be subject to fines of $591 per day that noncompliance continues.
- A person who willfully violates the BOI reporting requirements may also be subject to criminal penalties of up to two years imprisonment and a fine of up to $10,000.
If you have an interest in any company that falls under the CTA’s requirements, it is integral that you take action to ensure that you are in compliance by the end of this year since failure to do so can have substantial consequences, both financial and criminal. For more information on the CTA and what it requires, you can review FinCEN’s extensive FAQ page here.
Best Wishes,
Anna
PS: If you are interested in seeing some videos of my adventure in Pakistan, please follow the links below:
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