The road to onerous corporate compliance is paved with good intentions. Corporate Transparency Act (CTA), which took effect on January 1, 2024 is one such road. The goal of the Corporate Transparency Act is to combat money laundering by requiring business entities to report their beneficial business person. However, there are strict deadlines and steep penalties for noncompliance, so businessman must understand the CTA and how it might affect their businesses.
If you have a small business with less than 20 employees and up to $5 million in annual revenues as an entity like a limited liability company or S corporation, the act now requires you to give information about ownership and control.
What is the corporate transparency act?
Under the CTA, certain businesses are required to submit a Beneficial Ownership Information report to the U.S. Department of Treasury’s Financial Crimes Enforcement Network (FinCEN). The report must include the names of each beneficial owner who either owns at least 25% of the business or exercises “substantial control,”
The Corporate Transparency Act, voted on by Congress as a proactive measure to get ahead of shell companies and money laundering, requires eligible small businesses to fill out a Beneficial Ownership Information (BOI) report. The requirements include an $85 fee for filing and about 3 hours, according to experts.
Exemptions to Corporate Transparency Act
The entities that are exempted are 23. One should review FinCEN’s Small Entity Compliance Guide checklist to see whether their company qualifies for any of these exemptions.
Fraudulent Solicitations
FinCEN has put out an alert to be careful of “fraudulent attempts to solicit information from individuals and entities who may be subject to [CTA] reporting requirements.” Be particularly cautious of e-mails with the subject line “Important Compliance Notice” and that ask you “to click on a URL or to scan a QR code.”
Corporate transparency act penalties
If a report is not timely filed, FinCEN can impose civil penalties of $500 per day per entity, a $10,000 criminal penalty per entity and imprisonment for up to two years. To say the least, the consequences of not being in compliance are enormous.
Who governs corporate transparency act?
The Financial Crimes Enforcement Network, an arm of the U.S. Department of the Treasury, is handling the BOI filing and reporting. The group otherwise known as FinCEN focuses on financial crimes and corporate compliance services.
Corporate transparency act final regulations for whom
The Corporate Transparency Act targets small businesses that are LLC and S corporations with less than 20 employees or 5 million in revenue. You are exempt if you have over 20 employees and over $5 million in annual revenue.
Those with an ownership stake will be required to submit certain changes that were not previously relevant or reported within 30 days.
What does corporate transparency act entail?
Those impacted by the new law can complete the filing of the Beneficial Ownership Information themselves online.
Information required includes personal information, which may take some time to gather. Changes to your personal information — such as marriage or divorce may require a new filing within a certain time.
Preservation is better than cure
Many small businessman will likely spend several hours navigating the details of these requirements each year. They will also choose to hire an attorney to make sure each report is properly submitted. For businessman who already have too much on their plates, this might feel like one more headache with very stiff penalties for noncompliance.
To make navigating changing compliance requirements more manageable and stay informed of regulatory changes, businessman can consider working with a reputable business attorney and a CPA. Having an annual check-in meeting with business attorney to discuss any regulatory changes. Also check to make sure one is completing the legal requirements for business.
