The Corporate Transparency Act (CTA), which went into effect on January 1, 2024, introduces new reporting requirements that significantly impact how businesses disclose ownership information. Designed to combat illicit activities like money laundering and tax evasion, the law aims to create more transparency in U.S. business structures. If you own or manage a business, it is essential to understand how these new Corporate Transparency Act requirements affect your reporting obligations and the steps necessary to remain compliant.

What Is the Corporate Transparency Act?

The Corporate Transparency Act is a federal law that requires many businesses to report beneficial ownership information to the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of the Treasury. The purpose of this legislation is to prevent criminals from hiding behind anonymous companies or shell corporations. Businesses must now disclose information about their beneficial owners—those who own or control a company. This disclosure helps law enforcement and financial regulators understand who is behind a business, enhancing corporate accountability.

Who Needs to Report Under the CTA?

Under the CTA, companies must submit a report to FinCEN which includes key details about their beneficial owners. This information must include the full name, date of birth, current residential or business address, and a unique identifying number, such as a driver’s license or passport number.
A beneficial owner is someone who owns or controls at least 25% of a company or has substantial influence over it, such as senior officers. Companies that meet these criteria must now provide this data as part of their regulatory responsibilities. While certain larger businesses, publicly traded companies, and financial institutions are exempt from these requirements, many small businesses, limited liability companies (LLCs), and partnerships must comply.

When Are the Deadlines for Reporting?

Businesses formed before January 1, 2024, have until January 1, 2025, to submit their beneficial ownership information. For companies established after January 1, 2024, the beneficial ownership information must be reported within 90 days of the company’s formation. Business owners must act promptly to ensure they meet these deadlines. Non-compliance or submitting inaccurate information can lead to substantial fines and penalties, including a civil penalty of $500 per day if the company fails to submit the required information.

What Are the Penalties for Non-Compliance?

Failure to comply with the Corporate Transparency Act can have serious consequences. Businesses that do not report beneficial ownership information or provide false information may face severe civil and criminal penalties. Civil penalties can include fines of up to $500 per day for non-compliance.
More severe penalties (such as fines up to $10,000 and potential imprisonment) may be imposed for knowingly submitting false information. Given the serious nature of these penalties, it is critical that businesses take these new regulations seriously and submit accurate and timely reports to FinCEN.

How Can You Ensure Compliance?

To ensure compliance with the Corporate Transparency Act, businesses must first determine whether they are required to file a beneficial ownership information report. After identifying their beneficial owners, it is important to gather all necessary information to ensure it is complete and accurate before submitting it to FinCEN. Legal professionals who are well-versed in the Corporate Transparency Act 2024 requirements can provide valuable guidance during this process.

Are There Any Exemptions?

While many businesses must report their beneficial ownership information, there are exceptions to this rule. Large operating companies, publicly traded corporations, and regulated entities such as banks and credit unions are generally exempt from these reporting requirements. However, smaller entities like LLCs and partnerships are often subject to the law.

What Should Business Owners Do Next?

If you are a business owner, now is the time to prepare for the Corporate Transparency Act requirements. First, determine whether your business is subject to the reporting requirements.

Next, if you are required to report, identify your beneficial owners, collect their information, and complete the reporting form online. Visit fincen.gov/boi for more answers to frequently asked questions, a small business compliance guide, and to complete the reporting process.